Earlier today, GBP/USD moved lower and approached the October lows as uncertainty around the Brexit plans continued to weigh on the British currency. How low could the exchange rate go in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
On the weekly chart, we see that the medium-term picture hasn’t changed much as EUR/USD is still trading in a narrow range in the yellow resistance zone.
Can we infer something more from the daily chart? Let’s check.
From this perspective, we see that although EUR/USD slipped under the previously-broken lower border of the red declining trend channel, currency bulls stopped declines and took the exchange rate above this support/resistance line. This is a positive event, but as long as the pair remains in the blue consolidation another bigger move to the upside/downside is not likely to be seen and waiting at the sidelines for another profitable opportunity is justified from the risk/reward perspective.
Finishing today’s commentary on this currency pair, it is worth noting that the orange resistance zone stopped the earlier rally at the end of December, which suggests that the way to higher levels will be open only if EUR/USD breaks above it. Until this time, another attempt to move lower should not surprise us.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
Last Thursday, we wrote the following:
(…) GBP/USD invalidated the earlier breakout above the previously-broken green zone on Friday, which means that (…) the initial downside target for currency bears will be around 1.2127, where the purple support line currently is.
Looking at the daily chart, we see that the situation developed in tune with the above scenario and GBP/USD reached our first downside target. What’s next? Taking into account the sell signals generated by the indicators and the breakdown under the lower border of the blue rising trend channel, we think that the exchange rate will extend losses and we’ll see a realization of Thursday’s scenario in the coming days:
(…) a breakdown under the lower border of the blue rising trend channel, suggests a drop to around 1.2090, where the size of the move would correspond to the height of the channel. In this area is also the October low and the barrier of 1.2000, which together could stop further deterioration once again.
(…) it is also worth noting that if the currency bulls fail in this area, the exchange rate will likely drop to 1.1980, where the next Fibonacci extension (marked on the monthly chart below) is.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
MT outlook: mixed with bearish bias
LT outlook: mixed
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
On the daily chart, we see that although USD/CAD declined yesterday, the support area created by the 76.4% and 78.6% Fibonacci retracements together with the lower border of the purple trend channel withstood the selling pressure. As a result, the exchange rate rebounded once again and indicators generated buy signals, which suggests that we’ll likely see a test of the upper border of the blue consolidation and the previously-broken green zone in the coming days.
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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