The euro bulls have been able to defend an important support earlier today, triggering a rebound. Does it make an upside break from the recent consolidation more likely? What about the other pairs - is the USD giving up some ground there also? And most importantly, what are we going to do about it?
In our opinion, the following forex trading positions are justified - summary:
EUR/USD
On Friday, EUR/USD has been unable to overcome the rising green line, and closed the day below it. This has triggered further deterioration earlier today, yet the 38.2% Fibonacci retracement stopped the bears.
While a sharp rebound followed (the pair trades at around 1.1220 as we speak), the overall situation remains unchanged - the exchange rate is still confined to 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
As USD/CAD has invalidated its earlier breakout above the upper border of the rising green trend channel, a sharp move to the downside followed. The pair has also slipped below the previously-broken orange zone, closing the day below it.
This is certainly a bearish sign. Today's rebound attempt has fizzled out and looks like a verification of Friday's breakdown. Additionally, the CCI and Stochastic Oscillator have generated their sell signals, increasing the likelihood of a bigger move to the downside.
Such price action will be more likely and reliable only once we see the rate drop below the lower border of the rising green trend channel. Should we see that, 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
The daily chart shows that AUD/USD has recovered in the previous week, having climbed to the previously-broken lower border of the red declining trend channel.
As the sellers were quick to act, such price action looks like a verification of the breakdown below the trend channel. Nonetheless, the pair is still trading inside the declining grey trend channel and above the early-2019 low. The daily indicators have also just flashed their buy signals, hinting at a possible reversal around the corner.
But as long as there's no breakout above the lower border of the declining red trend channel, a bigger move to the upside is questionable. Therefore, opening long positions isn't justified from the risk/reward perspective.
Let's take a look at the weekly chart, and explore what might happen if the bulls fail in their price recovery attempts.
In such a case, further deterioration lies ahead. Even a test of the green support zone (created by the late-2008 and early-2009 lows) isn't out of the question.
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 bulls rejected today's attempted downswing, the pair is still trading inside its recent consolidation, and no new positions are justified. We'll watch whether USD/CAD bears manage to break below the lower border of the rising green trend channel as that could lead to opening short positions. 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
