There is this pearl of wisdom in the trading world. Plan the trade and trade the plan. We have just seen the importance thereof in the EUR/USD pair. It had positive direct implications for us and you, the subscriber. Does the above influence our outlook on the other currency pairs? Is there any corresponding action to take?

• EUR/USD:none (in other words, our profitable short position was closed automatically by the take-profit order)
• GBP/USD: short (a stop-loss order at 1.2979; the exit target at 1.2712)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: half of short positions (a stop-loss at 0.7228; the exit target at 0.7042)

EUR/USD

On the weekly chart, we see the pair is testing the lower border of the blue consolidation. The weekly indicators are still positioned in a bearish way (CCI, the most short-term sensitive one, has not flashed any buy signal yet).

Moving to the daily chart, on Friday we wrote:

(…) currency bulls didn’t manage to change the technical picture significantly. There was no break above the first chart resistance nearby, the 23.6% Fibonacci retracement.

The pair pulled back and closed the day below the above mentioned resistance. (...) It’s becoming increasingly probable that we’ll see a realization of the bearish scenario and a test of the red declining support line in the very near future.

Below this declining red support line, there is also the lower border of the blue declining trend channel, which may be an additional factor that could encourage the bulls to act in the following days. The two most recent white candles support the likelihood of the exchange rate willing to put up a fight before any further moves down.

Therefore, we decided to close our already profitable short positions and take profits off the table if EUR/USD declines to our downside target.

The situation developed in line with our assumptions and EUR/USD rebounded after a drop to our exit target. Thanks to this downswing, our short positions were automatically closed by the waiting exit order, increasing our trading capital for a third time in a row.

What’s next for the exchange rate?

Friday’s move created a candlestick with a long lower shadow, which shows heavy participation of currency bulls in the move. Yesterday, they built up on the gains and EUR/USD came back above the previously broken green zone. The daily indicators are not positioned negatively for such an upside move. Taking these into account, the pair could very well test the 38.2% Fibonacci retracement in the near future.

As a reminder, this important resistance was strong enough to stop the bulls in the previous week. If the pair has enough power to indeed approach it (at the moment of writing these words, it’s trading at around 1.1285 – which is back inside the green support zone), we’ll pay close attention to the bulls’ strength as it would give us more clues about likely future moves.

If they break above the 38.2% Fibonacci retracement, we’ll likely see next a test of the 50% Fibonacci retracement followed by the previously broken lower border of the brown rising trend channel. However, if they fail, another retest of the major supports and latest lows will be in cards once again and thus we’ll consider reopening 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.

USD/CAD

In our last commentary on this currency pair, we wrote:

(…) Yesterday, currency bears tried to go south, but the previously broken red support line stopped them. The bulls triggered a rebound that took the pair back into the consolidation.

The earlier breakdown was invalidated which suggests that further improvement can’t be ruled out. If the bulls show strength and trigger an upswing, we could see a test of the upper border of the yellow consolidation, possibly followed by the 50% Fibonacci retracement and the January peaks tests.

The buyers closed ranks on Thursday and took USD/CAD well into the upper border of the yellow consolidation just like we had expected. Despite the increase, this improvement was very temporary and the exchange rate turned south the day after, invalidating the earlier tiny breakout.

This triggered further deterioration and the pair came back to the lower line of the formation, approaching the previous low and the red rising support line. Nevertheless, there was no daily close below the consolidation, which encouraged the bulls to act earlier today.

As a result, the pair erased yesterday’s drop. It suggests that another attempt to reach the upper border of the yellow consolidation may be just around the corner.

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

We wrote the following last Tuesday:

(…) although currency bears pushed USD/CHF below the lower border of the blue rising wedge, this tiny breakdown was quickly invalidated. A sharp move to the upside followed.

Earlier today, the exchange rate extended gains, which suggests a possible test of the upper border of the rising wedge formation in the very near future. Inspecting the current position of the RSI and the CCI, it seems that the space for gains may be limited and reversal in the following days should not surprise us.

USD/CHF indeed moved higher till Wednesday, pulled back on Thursday and had a daily reversal on Friday to end the week on a bearish note. This resulted in the exchange rate breaking below the lower border of the rising blue wedge.

But for now, the pair remains still inside the blue consolidation and before another bigger move down, we would first need to see a decisive daily close below the consolidation. If the bears show strength in the following days, 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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist