The currencies continued in their pre-U.S. opening moves, with volatility picking up. While volatility is like weather (show me a trader who is content with it at any point in time), moments like this are invaluable. For when you put them in proper context, opportunities are emerging. And we're jumping on one like a tiger right now.
In our opinion, the following forex trading positions are justified - summary:
- EUR/USD: short (a stop-loss order at 1.1375; the initial downside target at 1.1233)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: short (a stop-loss order at 0.7072; the initial downside target at 0.6937)
EUR/USD
Yesterday, EUR/USD has moved sharply lower and closed the day below the 38.2% Fibonacci retracement. The bulls attempted to move higher earlier today but still remain far from the blue zone marking the early-June peaks.
As long as there is no invalidation of a breakdown below it and as long as the pair doesn't return to trade inside the yellow consolidation, another downswing remains probable. Should the bearish case come to fruition, we're likely to see a test of the lower border of the rising orange trend channel.
Taking all the above into account, opening short positions is justified from the risk/reward perspective.
Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1375 and the initial downside target at 1.1233 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
On Friday, we have seen a meek attempt of the bulls to bring the pair closer to the orange resistance zone. The bears easily broke their efforts, and another downswing followed. The pair has slipped to the 61.8% Fibonacci retracement, approaching the lower border of the declining red trend channel.
The presence of these supports might encourage the bulls to act again. Before we see a potential rebound however, one more downswing targeting the lower border of the declining red trend channel can't be ruled out. This is the case especially since the daily indicators aren't on any buy signals just yet.
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/CHF
USD/CHF opened yesterday's session with a blue gap, and the bulls pushed the pair considerably higher since. The lower red gap has been closed, and the exchange rate scored further improvements.
As a result, the pair has reached the upper border of the declining red trend channel, approaching the 61.8% Fibonacci retracement. As the daily indicators haven't issued any sell signals, it looks likely that the bulls will attempt to reach the next red gap (that's at the declining red resistance line currently) before any correction of this upswing gets a chance to play out.
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, the EUR/USD reversal lower has caught the bulls off guard and warrants opening short positions. While the AUD/USD bulls are attempting a comeback today, both the short- and medium-term outlook continue to point in the direction of deterioration down the road. Apart from these, there're no other opportunities worth acting upon in the currencies. As always, we'll keep you - our subscribers - informed.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
