What a day for the euro bulls. Again, they've been trying hard to take the pair higher, only to fail yet again. Are these the usual teething troubles of a rally in the making, or is there more to the story? You bet. The conclusion makes us content that the right decision has been made. Apart from euro, let's dive in to the other pairs and the opportunities they present.
In our opinion, the following forex trading positions are justified - summary:
- EUR/USD: short (a stop-loss order at 1.1362; the initial downside target at 1.1215)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
This is what "Groundhog Day" for the euro bulls must feel like. Another day, another failed attempt to go higher.
The recent peaks in combination with the nearest resistances (the 50% Fibonacci retracement and the upper border of the blue declining trend channel) stopped the buyers for the fourth trading day in a row.
As a result, the pair pulled back, invalidating today's tiny intraday breakout.
The sell signals of the daily indicators remain on the cards, which suggests that lower values of the exchange rate are still ahead of us.
If this is the case, we'll see a test of the lower border of the very short-term green rising trend channel. After that, the red support line (the lower border of the long-term red declining trend channel) can be tested in the following days.
Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1362 and the initial downside target at 1.1215 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 both USD/JPY daily charts (the latter one is a close-up), we see the short-term situation as pretty much unchanged. USD/JPY is still trading in a tight range between the previously-broken orange resistance zone and the yellow resistance zone not far above it.
In recent days, the market participants created three doji candlesticks. These suggests some uncertainty among market participants and shows that neither bulls nor bears enjoy an advantage in the market.
Nonetheless, the current position of the daily indicators suggests that another move will probably be to the downside. Such a move will be more likely and reliable only if the pair drops below the orange zone and thereby invalidates the earlier breakout. Until then, short-lived moves in both directions wouldn't surprise us.
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
Let's start with the weekly chart. USD/CAD had moved lower this week and approached the lower border of the yellow consolidation.
How did this affect the short-term picture?
The daily chart shows another unsuccessful attempt to move higher. As it had run out of steam, another test of the blue support zone followed. This is similar to what we have seen quite a few times in the previous weeks.
Taking into account the sell signals by the daily indicators, it seems that another attempt to move lower and a test of the declining blue support line (the upper border of the blue declining trend channel) would not surprise us in the least. Even a test of the rising red support line in the coming days is not out of the question.
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.
Summing up the Alert, we see continued signs of the euro bulls' weakness and the short position remains justified. There're no other opportunities worth acting upon across the currencies right now. As always, we'll keep you - our subscribers - informed.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
