Earlier today, currency bears invalidated the breakout above the first resistance line once again. What impact could this development have on their opponents?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (a stop-loss order at 1.2568; the initial downside target at 1.2173)
- GBP/USD: short (a stop-loss order at 1.4480; the initial downside target at 1.3851)
- USD/JPY: none
- USD/CAD: short (a stop-loss order at 1.2985; the next downside target at 1.2710)
- USD/CHF: long (a stop-loss order at 0.9329; the initial upside target at 0.9736)
- AUD/USD: none
EUR/USD
The first thing that catches the eye on the daily chart is an invalidation of the breakdown under the grey medium-term support line based on the November and December 2017 lows. Although this positive event triggered a rebound on Friday, the combination of the nearest resistances (the upper border of the black declining trend channel and the lower line of the blue rising trend channel (in terms of daily openings lows) continues to keep gains in check.
Therefore, in our opinion, as long as there is no successful breakout above them another attempt to move lower is very likely. If this is the case, and EUR/USD declines from current levels, we will see a re-test the strength of the grey support line or even the 38.2% Fibonacci retracement and the green support zone in the very near future.
Trading position (short-term; our opinion): Profitable short positions (with a stop-loss order at 1.2568 and the initial downside target at 1.2173) 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/JPY
From today’s point of view, we see that although USD/JPY broke above the upper border of the purple declining trend channel and closed Thursday’s session above the red horizontal line based on the September low, currency bulls didn’t manage to use these improvements to push the exchange rate higher.
This show of weakness triggered a decline on the following day, which resulted in an invalidation of the earlier breakout, which together with the sell signals generated by the indicators suggests that further deterioration may be just around the corner. If this is the case and USD/JPY extends losses, we’ll see at least a test of the previously-broken upper border of the purple declining trend channel.
Nevertheless, as long as the pair remains in the blue consolidation, short-lived moves in both directions should not surprise us. Therefore, waiting at the sidelines for another opportunity remains the best decision.
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 overall situation in the very short term hasn’t changed much as AUD/USD is still trading under the pink declining resistance line based on the late March highs.
Nevertheless, earlier today, currency bears invalidated the tiny breakout above this line once again, which together with the sell signals generated by the daily indicators suggests lower values of the exchange rate in the coming day(s).
How low could AUD/USD go? In our opinion, if the pair moves lower from here, we’ll see a re-test of the two Fibonacci retracements, which stopped currency bears at the end of the previous month or even the lower border of the blue declining trend channel.
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
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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