After yesterday's retracement of the Fed moves, today is bringing us reversals in the original directions. Look no further than the euro or the cable. And the other pairs surely deserve a good deal of our attention too. Indeed, let's take a look at the rich formation of opportunities right before the weekend.
In our opinion, the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: short (a stop-loss order at 1.2596; the initial downside target at 1.2172)
- USD/JPY: none
- USD/CAD: none
- USD/CHF: short (a stop-loss order at 0.9996; the initial downside target at 0.9768)
- AUD/USD: none
EUR/USD
EUR/USD is still trading inside the blue consolidation slightly below the upper border of the yellow declining trend channel. Nevertheless, the proximity to the upper border of the trend channel suggests that a reversal may be just around the corner. It would be supported by the position of the Stochastic Oscillator as it is very close to flash its sell signal.
Should the exchange rate reverse and decline in the very near future, we could see a test of the lower border of the blue consolidation shortly.
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
Although GBP/USD broke above the pink resistance zone and the upper border of the blue consolidation, the red resistance area created by the mid-July peaks stopped the buyers. A pullback followed.
Additionally, the CCI and the Stochastic Oscillator are very close to generating their sell signals. This increases the probability that we'll see a reversal and lower values of the exchange rate in the very near future.
If this is the case, the first downside target for the bears will be the lower border of the blue consolidation.
Connecting the dots, opening short positions is justified from the risk/reward perspective. All details below.
Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.2596 and the initial downside target at 1.2172 are justified from the risk/reward perspective.
AUD/USD
AUD/USD extended losses in recent days, and the daily indicators' sell signals suggest that further deterioration may still be ahead of us. If this is the case and the exchange rate moves even lower from current levels, where can the bears aim to go?
We'll likely see a test of the previously-broken lower border of the declining red trend channel or even a drop to the lower border of the declining grey trend channel in the coming week.
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, while the euro keeps trading inside its recent consolidation, the proximity to the upper border of the declining yellow trend channel has triggered a reversal-in-progress. This move is supported by the Stochastic Oscillator's approaching sell signal. GBP/USD bulls have shown weakness at the red resistance zone, and both the CCI and Stochastic Oscillator are on the verge of flashing their sell signals. Opening short positions is therefore justified from the risk-reward perspective. USD/CHF reversal at the pink resistance zone and the upper border of the rising green trend channel remains in play, and the short position is justified. 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
