In our opinion the following Forex Trading Positions are justified - summary:

• EUR/USD: short (a stop-loss order at 1.2806; the initial downside target at 1.2186)
• GBP/USD: short (a stop-loss order at 1.4548; the next downside target at 1.3685)
• USD/JPY: long (a stop-loss order at 107.82; the initial upside target at 111.33)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (a stop-loss order at 0.8222; the downside target at 0.7743)

EUR/USD

The pair extended losses after our yesterday’s commentary and closed the day under the 23.6% Fibonacci retracement based on the entire November-January upward move. Earlier today, the exchange rate moved even lower, which together with the lack of the buy signals generated by the daily indicators indicates that EUR/USD remains on its way to our downside targets.

How low could the pair go? In our opinion, the first downside target for currency bears will be the previously-broken upper border of the rising wedge (orange line based on the November and January highs) around 1.2200. Additionally, slightly below this level, the size of the downward move (around 1.2190) will correspond to the height of the consolidation, which increases the probability of the test of this area in the coming days.

GBP/USD

The exchange rate slipped to the first support area (created by the 38.2% Fibonacci retracement based on the entire October-January upward move and the black support line based on the October, November and December highs) once again during yesterday’s session. Earlier today, the pair moved a bit higher, but as long as there are no buy signals one more move to the downside is likely.

If this is the case and the pair moves lower from current levels, the next downside target will be around 1.3685, where the 50% Fibonacci retracement (based on the entire October-January upward move) is.

USD/JPY

Although the pair moved lower and declined below the lower line of the short-term blue declining trend channel yesterday, currency bulls didn’t give up and managed to close Wednesday’s session above this line, invalidating the earlier breakdown once again. Additionally, the Stochastic Oscillator re-generated the buy signal, which suggests a test of the last week’s highs and the 38.2% Fibonacci retracement in the coming day(s).

USD/CAD

Yesterday, we wrote that as long as there were no sell signals, we could see one more upswing and a test of the next retracement and the January 11 peak around 1.2581. Earlier today, currency bulls realized this scenario and the pair climbed slightly above these levels. If we see a daily closure above them, further improvement and a test of the next retracement won’t be ruled out. Nevertheless, the current levels of the indicators suggest that reversal is just around the corner.

USD/CHF

Yesterday, the exchange rate extended gains and closed the day above the upper border of the consolidation (at 0.9427) just like we had expected. Taking this bullish development into account and combining it with the buy signals, which remain in the cards, we think that the pair will test the 38.2% Fibonacci retracement (around 0.9550) in the coming days. What’s interesting, in this zone the size of the upward move will also correspond to the height of the above-mentioned consolidation, which increases the probability of reversal in this area.

AUD/USD

In our previous commentaries on this currency pair, we suggested that the exchange rate would test the 50% Fibonacci retracement and the next downside target around 0.7816 (the January 9 and 10 lows) in the coming days. Earlier today, we noticed that currency bears took the pair not only to the above-mentioned target, but also a bit lower, making our short positions more profitable. Although all indicators are oversold at the moment of writing these words, we think that further declines to around 0.7743 (the support area created by the 61.8% Fibonacci retracement and the November high) should not surprise us.

Finishing today’s commentary please note that there will be no regular Forex Trading Alerts until the end of the week. The next full alert (with charts and broader perspective) will be post on Monday. Nevertheless, short text messages such as the one you are reading now will also be sent tomorrow. Thank you for understanding.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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