Forex Trading Alert originally sent to subscribers on September 11, 2014, 1:02 PM.
Earlier today, the Labor Department showed that initial claims for jobless benefits rose by 11,000 in the week ended September 6 to the highest level since late June, while analysts had expected a 4,000 drop. Thanks to these disappointing numbers, U.S. dollar moved lower against its Canadian counterpart, but did this move change anything?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: long (stop-loss order: 1.2846; initial price target: 1.3200)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: short (stop-loss order at 1.1068; initial price target: 1.0812)
- USD/CHF: none
- AUD/USD: none
EUR/USD
The medium-term picture hasn’t changed much and EUR/USD still remains above the support zone created by the 88.6% Fibonacci retracement and the long-term green support line based on the Nov 2012 and Jul 2013 lows. Today, we’ll focus on the daily chart.
Looking at the above chart, we see that the very short-term picture also hasn’t changed much as EUR/USD is trading in a consolidation (marked with blue) between Tuesday’s high and low. Therefore, as long as there is no breakout above the upper line of the formation (or a breakdown below the lower line), another sizable move is not likely to be seen. Nevertheless, taking into account buy signals generated by the CCI ad Stochastic Oscillator and an invalidation of the medium-term breakdown, we still believe that the next move will be to the upside. Please note that a breakout above the upper line of the consolidation should result in an increase to at least 1.3055, where the size of the upswing would correspond to the height of the formation and the 23.6% Fibonacci retracement (based on the Jul-Sep decline) is.
Very short-term outlook: bullish
Short-term outlook: mixed with bullish bias
MT outlook: mixed
LT outlook: bearish
Trading position (short-term; our opinion): Long with a stop-loss order at 1.2846. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
As you see on the above chart, although USD/CAD rebounded once again, the pair still remains below the green support/resistance line and the 61.8% Fibonacci retracement, which together create a strong resistance zone. On Tuesday, this area successfully stopped the rally, therefore, we think that we’ll see similar situation later today – especially when we factor in the fact that the Stochastic Oscillator generated a sell signal, supporting the bearish case.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
Trading position (short-term): Short with a stop-loss order at 1.1068. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
The medium-term outlook hasn’t changed much as USD/CHF still remains under the strong orange resistance zone created by the 161.8% Fibonacci price projection and the 61.8% Fibonacci retracement. Let’s examine the daily chart and check the very short-term changes.
Quoting our last Forex Trading Alert:
(…) the pair climbed above 0.9373, where the size of the upward move corresponds to the height of the long-term declining trend channel (marked with blue). Taking this fact into account and combining it with the current position of the indicators (they all are overbought and there are negative divergences between the CCI, Sochastic Oscillator and the exchange rate) and the strong orange resistance zone seen on the weekly chart, it seems to us that the next move will be to the downside.
From this perspective, we see that although USD/CHF moved little higher yesterday, the above-mentioned resistance zone stopped the rally and the pair reversed. Although the size of the pullback is not significant at the moment, we should keep in mind that the CCI and Stochastic Oscillator generated sell signals (while the RSI is very close to doing it), which could accelerate the decline in the coming days. If this is the case, the initial downside target will be around 0.9284, where the bottom of the previous pullback is.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
MT outlook: mixed with bullish bias
LT outlook: bearish
Trading position (short-term): In 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
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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