Australian Dollar At an Important Juncture

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

EUR/USD: none (in other words, our long positions were closed with a profit)
GBP/USD: none
USD/JPY: short (a stop-loss order at 110.04; the exit target at 108.04)
USD/CAD: none
USD/CHF: none
AUD/USD: none

EUR/USD

(...) The situation has indeed developed in line with the above, and EUR/USD has staged an upside reversal recently.

Earlier today, the pair had been trading around yesterday's peak. Combined with the lack of the daily indicators' sell signals, it increases the probability that we'll see a test of the upper border of the grey declining trend channel in the very near future.

EUR/USD has indeed extended gains, breaking above the upper border of the declining grey trend channel during yesterday's session. This has made our long positions even more profitable.

The exchange rate has approached the red resistance zone that is created by the August peaks and the 61.8% Fibonacci retracement. Coupled with high readings of the daily indicators, this increases the likelihood of a reversal in the coming week.

If the situation develops in line with the above scenario, and should we see reliable signs of the bulls' weakness (such as an invalidation of the breakout above the previous peaks or the upper border of the declining grey trend channel), we'll consider opening short positions.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective as our long positions were automatically closed with a profit and another profitable opportunity is just around the corner.

USD/CHF

Let's once again quote our yesterday's Alert:

(...) USD/CHF has indeed extended losses recently. As the pair broke below the green support, and there being no buy signals of the daily indicators, we'll likely see a test of the next green support area in the very near future.

USD/CHF has indeed slipped to our downside target during yesterday's session. The support however triggered a rebound, which eventually fizzled out and the bears took the pair back to the support earlier today.

Coupling that with the oversold readings of the daily indicators, it's reasonable to expect a reversal and higher values of the exchange rate quite soon.

Should we see reliable signs of the bulls' strength, we'll consider opening long positions.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

AUD/USD

It can be certainly said that AUD/USD has surprised on the upside recently. Having reached several important resistances, and attempting breakout above them, what else can be said about the pair's current and upcoming performance?

Let's remember our yesterday's observations regarding the AUD/USD price action:

(...) A rebound followed, taking the pair sharply up right to the medium-term declining resistance line, which could trigger a reversal in the very near future however.

Nevertheless, taking into account the lack of the sell signals, another upswing and a test of the next declining resistance line can't be ruled out.

Again, AUD/USD has moved higher yesterday, in line with our expectations. The pair moved above the resistance line, and broke above the late-October and early-November peaks, which is a bullish development.

This is especially so when we take into account the fact that the exchange rate also broke above the orange resistance area created by both the 38.2% Fibonacci retracement (in red) and the 61.8% Fibonacci retracement (in green).

The bulls however didn't manage to hold gained ground, and the previously broken green line based on the October lows encouraged the sellers to act.

As a result, the exchange rate pulled back earlier today and invalidated the earlier breakout above the previous peaks and the 61.8% Fibonacci retracement. This suggests that a reversal and lower values of AUD/USD may be just around the corner.

The daily indicators haven't flashed any sell signals however. This means that a retest of the green line based on the October lows at the beginning of the coming week can't be ruled out.

Should we see reliable signs of the bulls' weakness, we'll consider going short.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist

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