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

In our recent commentaries on this currency pair, we wrote that the first downside target for currency bears would be the previously-broken upper border of the rising wedge (orange line based on the November and January highs). Yesterday, they realized this scenario and EUR/USD touched the above-mentioned support line. Although the exchange rate rebounded slightly after this drop, the sellers pushed the pair lower earlier today, which suggests that we’ll see are-test of the orange line or even a drop to the 38.2% Fibonacci retracement based on the entire November-January upward move (around 1.2163) in the coming day(s).

GBP/USD

Although the exchange rate bounced off 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), the proximity to the previously-broken lower border of the blue consolidation encouraged currency bears to act yesterday. As a result, the pair reversed and erased most of the earlier increase. This bearish development together with the lack of the buy signals generated by the daily indicators triggered further deterioration earlier today. Thanks to today’s drop GBP/USD slipped under the above-mentioned support area, which suggests lower values of the exchange rate in the coming day(s).

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

The recent price action in this currency pair we can summarize in simple word: uncertainty. On one hand, currency bulls invalidated the breakdown under the lower border of the blue declining trend channel twice, but on the other hand, they didn’t manage to push the pair visibly higher and USD/JPY came back to the green consolidation between the January 26 high and low. This makes the very short-term outlook a bit unclear, but we’ll wait for today’s (and weekly) closing price to estimate whether long positions are still justified from the risk/reward perspective.

USD/CAD

The overall situation in the very short term has improved slightly after the exchange closed yesterday’s session above the January 11 peak, which (as we wrote yesterday) suggests further improvement and a test of the next retracement around1.2662. Nevertheless, the current levels of the indicators suggest that reversal is just around the corner.

USD/CHF

Although the exchange rate extended gains and climbed above the upper border of the consolidation, currency bulls didn’t manage to hold USD/CHF above the 23.6% Fibonacci retracement for long. This show of weakness encouraged their opponents to act, which resulted in a quite sharp decline and invalidation of the earlier breakouts. Such price action doesn’t bode well for currency bulls, which could translate in further deterioration in the coming week.

AUD/USD

The exchange rate closed yesterday’s session below the 50% Fibonacci retracement, 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.

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

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