Yesterday, the euro extended gains against the greenback, which approached EUR/USD to September high, but will we see further rally in the coming days?

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 approached September peak yesterday, this resistance encouraged currency bears to act, which resulted in a pullback earlier today. Additionally, the RSI generated the sell signal (while the CCI and the Stochastic Oscillator are very close to doing the same), which together with the upper border of the orange resistance zone (marked on the long-term chart below) suggests that bigger move is just around the corner.

Trading position (short-term; our opinion): short positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1510) continue to be 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 approached the orange resistance zone created by the September high – similarly to what we saw in the case of EUR/USD. Earlier today, the pair pulled back, which together with the current position of the daily indicators increases the probability of a bigger move to the south in the coming days.

Trading position (short-term; our opinion): short positions (with a stop-loss order at 1.3773 and the next downside target at 1.3000) continue to be 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:

(…) USD/CHF extended losses in recent days, which together with the sell signals generated by the daily indicators suggest that we’ll see a test of the lower border of the red declining trend channel in the very near future. Nevertheless, even if currency bears manage to push the pair below the lower line of the formation, we think it will be very temporary, because the green support zone (created by the recent lows and the 50% Fibonacci retracement) is quite close and blocks the way to lower levels.

From today’s point of view, we see that the situation developed in line with the above scenario and currency bears pushed USD/CHF lower as we had expected. As a result, the pair slipped slightly below the green support zone and tested the previously-broken upper border of the brown declining trend channel. As you see, this support encouraged currency bulls to act, which resulted in a rebound and a comeback to the lower border of the red declining trend channel. At the first sight such price action looks like a verification of the earlier breakdown, but the current position of the daily indicators (the RSI generated a buy signal, while the CCI and the Stochastic Oscillator are very close to doing the same) suggests that the space for declines is limited and a bigger move to the upside is just around the corner. If this is the case, and we see reliable bullish development (for example, an invalidation of the breakdown under the lower border of the red declining trend channel), we’ll consider opening long positions.

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.

Thank you.

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

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