Earlier today, the Australian dollar extended gains against the greenback, which pushed AUD/USD above the upper border of the declining trend channel. Although this is a positive sign can we trust it?

In our opinion the following forex trading positions are justified - summary:

• EUR/USD: short (a stop-loss order at 1.2250; the initial downside target at 1.1510)
• GBP/USD: short (a stop-loss order at 1.3773; the next downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

From today’s point of view, we see that although EUR/USD moved a bit higher and extended gains earlier today, the overall situation in the short term (and even long term) hasn’t changed much as the major resistances (the orange resistance zone marked on the monthly chart and the yellow resistance zone seen on the daily chart) continue to keep gains in check. Therefore, in our opinion, as long as there is no breakout above them another reversal and declines are likely. If this is the case and the exchange rate drops from current levels, the initial downside target for currency bears will be around 1.1831, where the lower border of the blue rising trend channel is.

Very short-term outlook: mixed with bearish bias
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): short positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1510) 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/CHF

Quoting our last commentary on this currency pair:

(…) the pair reached the lower border of the brown declining trend channel, which together with the buy signals generated by the daily indicators suggests that higher values of USD/CHF are just ahead of us. Therefore, we think that if the pair moves higher from current levels, we’ll see (at least) an increase to the upper border of the formation (currently around 0.9900) in the following days.

Looking at the daily chart, we see that the situation developed in line with the above scenario and currency bulls pushed the pair higher. Nevertheless, they didn’t manage to reach the upper border of the trend channel, which showed their weakness yesterday. As a result, their opponents took control and pushed USD/CHF lower earlier today. Taking this fact into account, it seems that we may see a test of the recent lows (or even the lower border of the brown declining trend channel and the upper line of the orange declining trend channel) in the coming week.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

The first thing that catches the eye on the daily chart is a breakout above the upper border of grey declining trend channel. Although this is a positive sign, we should keep in mind that we saw similar price action on Monday. Back then, currency bulls didn’t manage to hold gained levels, which suggests that as long as we don’t see a daily closure above this line another pullback can’t be ruled out.

Nevertheless, taking into account the buy signal generated by the daily Stochastic Oscillator and the buy signals generated by the weekly indicators, we think that further improvement in the coming week is more likely than another bigger move to the downside (if AUD/USD closes today’s session above the upper border of the grey declining trend channel).

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

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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