Don't be fooled by the apparent indecision in some currency pairs while we see the others moving to fresh 2019 extremes. Such an action smells of cashing profits and identifying new trading setups, which is exactly the subject of today's Alert.
In our opinion, the following forex trading positions are justified - summary:
EUR/USD
We wrote in our yesterday's commentary that while:
(...) the exchange rate moved below the upper border of the declining yellow trend channel, suggesting that we'll see a test of the 38.2% Fibonacci retracement in the very near future.
Nevertheless, the buy signal generated by the Stochastic Oscillator suggests that the bulls will defend this support.
The bears didn't have much success yesterday. The overall situation in EUR/USD hasn't changed much as the exchange rate is still trading inside the blue consolidation.
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
USD/CAD extended gains in previous days, climbing not only above the orange resistance zone, but also above the 50% Fibonacci retracement and the upper border of the green rising trend channel.
Nevertheless, the current position of the daily indicators suggests that the space for gains is limited and reversal in the very near future should not surprise us. This is especially so when we factor in that the 61.8% Fibonacci retracement and the red gap are not far from current levels and could trigger reversal in the following day(s).
Should we see such price action and signs of the bulls' weakness (such as an invalidation of the breakout above the upper border of the green channel), we'll consider opening short positions.
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
AUD/USD extended losses, dropping below the lower border of the short-term declining grey trend channel during recent sessions. This decline extended beyond the early 2019 low.
Despite this bearish omen, the drop was only short-lived. The buyers took the pair back into the declining grey trend channel, suggesting that we'll see a test of the previously-broken lower border of the declining red trend channel in the very near future.
This scenario is also reinforced by the current positions of the daily indicators - the Stochastic Oscillator generated a buy signal, while the CCI is very close to doing the same.
Should the pair extend its gains and should the bulls be strong enough to invalidate last week's breakdown below the declining red trend channel, we'll consider opening long positions.
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/JPY
Before summarizing today's Forex Trading Alert please note that USD/JPY hit a fresh low and tested the lower border of the grey declining trend channel yesterday, which triggered another rebound. Such price action suggests that the bulls are active in this area and the sellers could have issues breaking down below the channel. Therefore, closing the remaining 50% of short positions and taking profits off the table (at the moment of writing these words USD/JPY is trading under 106) is justified from the risk/reward perspective.
Nevertheless, if we see reliable signs of the bulls' weakness and the breakdown below the grey channel, we'll consider reopening short positions.
USD/CHF
We see similar price action also in the case of USD/CHF: a short-lived breakdown below the lower border of the blue consolidation, a drop below our next downside target, followed by a rebound and daily close inside the consolidation. These mean an invalidation of the earlier breakdown below the lower line of the formation. Additionally, the daily indicators are very close to generating their buy signals, suggesting that higher values of the exchange rate may be just around the corner.
Connecting the dots, closing the remaining 50% of short positions and taking profits off the table (at the moment of writing these words USD/CHF is trading below the levels at which we closed the first part of short positions) is justified from the risk/reward perspective.
Summing up the Alert, the euro is still trading inside its recent consolidation, and no new positions are justified right now. As USD/JPY hit a fresh low that activated the bulls' appetite, closing the remaining 50% of the profitable short position is justified. And this is also the case with USD/CHF where closing the remaining 50% of the profitable short is warranted. We're keeping an eye on the opportunities in the making in USD/CAD and AUD/USD - for now, no action 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
