On Friday, the Australian dollar moved sharply higher against its U.S. counterpart, which resulted in a climb to the 38.2% Fibonacci retracement. Will this resistance level manage to stop further improvement in the coming week?

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 initial downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Earlier today, EUR/USD extended losses, which means that what we wrote on Friday remains up-to-date also today:

(…) EUR/USD reversed and declined after an increase to the neck line of the head and shoulders formation and the lower border of the orange resistance zone seen on the monthly chart. Taking this fact, the current position of the daily indicators (…) and the sell signals generated by the long-term CCI and the Stochastic Oscillator, we think that the recent upward move was nothing more than a verification of the earlier breakdown below the above-mentioned resistance. If this is the case, EUR/USD will decline from current levels and re-test the green horizontal support line based on the mid-August low in the coming days.

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

Trading position (short-term; our opinion): Short profitable 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.

GBP/USD

Looking at the daily chart, we see that GBP/USD rebounded in the previous week, which resulted in a climb to the 50% Fibonacci retracement. Despite the improvement, the exchange rate moved a bit lower earlier today, which together with the sell signal generated by the Stochastic Oscillator suggests that lower values of GBP/USD are just around the corner (especially when we factor in the sell signals generated by the weekly indicators, which continue to support currency bears).

If this is the case and the pair moves lower from current levels, we’ll likely see a decline to the lower border of the brown rising trend channel marked on the weekly chart and the support zone created by the 76.4% and 78.6% retracements (around 1.3000) in the coming week.

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

Trading position (short-term; our opinion): Short profitable positions (with a stop-loss order at 1.3773 and the next downside target at 1.3000) 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 situation in the medium term hasn’t changed much as AUD/USD is trading between the orange resistance zone and the yellow support zone. Today, we’ll focus on the very short-term changes.

Quoting our last commentary on this currency pair:

(…) AUD/USD climbed above the upper border of the red declining trend channel and closed the day above it, which resulted in further improvement earlier today. Additionally, indicators generated buy signals, supporting higher values of the exchange rate. How high AUD/USD could go? In our opinion, the initial upside target will be around 0.7879, where the 38.2% Fibonacci retracement is.

From today’s point of view, we see that the situation developed in line with the above scenario and AUD/USD increased to our first upside target on Friday. Additionally, the CCI and the Stochastic Oscillator climbed to their overbought areas, which suggests that reversal may be just around the corner. Nevertheless, as long as there are no sell signals, one more upswing to around 0.79.27-0.7936 (in this zone the size of the upward move will correspond to the height of the red declining trend channel and the 50% retracement is) can’t be ruled out.

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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