What an eventful weekend we had! It hasn't been only oil that was influenced the most - the currencies enjoyed quite some moves as well. And those opening gaps... The euro went sharply lower, and the strengthening U.S. dollar took its toll on most other parts available. Where does it leave our open positions - what trading decisions are appropriate here?
In our opinion, the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: none (we decided to take profits off the table)
- 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 (we decided to take profits off the table)
On Friday, the pair closely approached the 38.2% Fibonacci retracement. Its breakout attempt above the upper border of the declining yellow trend channel has been invalidated however, which is certainly a bearish development.
We didn't have to wait for a long time for the following move lower. Earlier today, the exchange rate moved quite sharply down, suggesting we could see a test of the 1.1000 level in the very near future.
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
We wrote these words in our Wednesday's commentary:
(...) As there are no sell signals at the moment, we still could see a test of the pink resistance zone created by the 61.8% Fibonacci retracement and the 38.2% retracement based on the entire May-September downward move.
GBP/USD indeed extended gains and climbed to our upside target - the pink resistance zone.
Earlier today, we have seen a pullback though. Also, the daily indicators are in an extended position. Therefore, closing long positions and taking profits off the table is justified from the risk/reward perspective.
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.
AUD/USD
On Friday, AUD/USD made another unsuccessful attempt to move above the 50% Fibonacci retracement. Looking at this pair also, we see an extended position of the daily indicators.
Therefore, closing long positions and taking profits off the table is justified from the risk/reward perspective.
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, Friday's euro upswing finished with an unsuccessful breakout attempt above the upper border of its trend channel, inviting further downside. Both GBP/USD and AUD/USD daily indicators are in an extended position, justifying closing both profitable positions in order to take profits off the table. 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
