Earlier today, the greenback moved higher against the Australian dollar after the Australian Bureau of Statistics reported that private capital expenditure fell 2.1% in the fourth quarter, missing expectations for a 0.5% drop. Did this increase change the very short-term picture of AUD/USD?

In our opinion the following forex trading positions are justified - summary:

• EUR/USD: short (a stop-loss order at 1.0735; the initial downside target at 1.0388)
• GBP/USD: none
• USD/JPY: long (a stop-loss order at 111; the initial upside target at 115.43)
• USD/CAD: long (a stop-loss order at 1.2949; the initial upside target at 1.3302)
• USD/CHF: long (a stop-loss order at 0.9891; the initial upside target at 1.0180)
• AUD/USD: none

EUR/USD

Looking at the charts, we see that although EUR/USD moved a bit higher yesterday, there are no buy signals, which could encourage currency bulls to act. Therefore, we believe that another downswing is just around the corner.

How low could the pair go in the coming days? We believe that the best answer to this question will be the quote from our Tuesday’s alert:

(…) we’ll see a drop to (at least) 1.0460, where the 76.4% and 78.6% Fibonacci retracements are. If this area is broken, the next target for currency bears will be the January low of 1.0339. (…)

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.0735 and the initial downside target at 1.0388 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/JPY

On the daily chart, we see that the overall situation hasn’t changed much since Tuesday, which means that our previous commentary on this currency air is up-to-date also today:

(…) USD/JPY verified the earlier breakout above the upper border of the blue declining trend channel and rebounded (…) which together with the buy signal generated by the Stochastic Oscillator suggest further improvement and (at least) a test of the yellow resistance zone in the coming days.

Very short-term outlook: bullish
Short-term outlook: mixed with bullish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Long positions (with a stop-loss order at 111 and the initial upside target at 115.43) 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.

AUD/USD

On the weekly chart, we see that AUD/USD moved higher earlier this week and re-tests the yellow resistance zone. Will it move higher? In our opinion, it is doubtful, because this area was strong enough to stop currency bulls several times in the past, which suggests that another attempt to move lower may be just around the corner. This scenario is also reinforced by the current position of the indicators – the CCI and the Stochastic Oscillator are very close to generating sell signals.

Will the very short-term picture confirm this pro bearish scenario? Let’s check.

Looking at the daily chart, we see that the overall situation hasn’t changed much as the exchange rate is still trading in the red rising trend channel, which makes the very short situation a bit unclear. Nevertheless, taking into account the medium-term picture, we think that the pair will test the lower border of the formation in very near future. If AUD/USD declines under this support line, we’ll likely open short positions. In this case, the next target for currency bears will be the green support zone.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. However, if AUD/USD declines under the lower border of the red rising trend channel, we’ll likely open short positions. As always - we will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

As a reminder – “initial target price” means exactly that – an “initial” one, it’s not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade) we will refer to these levels as levels of exit orders (exactly as we’ve done previously). Stop-loss levels, however, are naturally not “initial”, but something that, in our opinion, might be entered as an order.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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