Although the euro hit a fresh 11-year low against the greenback after anti-austerity Syriza party won the elections in Greece, EUR/USD rebounded in the following hours, invalidating very important breakdown. Is it enough to trigger a trend reversal?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Quoting our Friday’s Forex Trading Alert:
(…) currency bears not only took the exchange rate to our downside targets, but also managed to push EUR/USD to the 100% Fibonacci price projection based on the May 2011 and May 2014 highs and the Jul 2012 low. If this support encourages currency bulls to act, we’ll see an invalidation of the breakdown under the 61.8% Fibonacci retracement. Such price action would be a solid positive sign that could trigger further improvement.
Looking at the charts, we see that the situation developed in line with the above-mentioned scenario and EUR/USD rebounded sharply, invalidating the breakdown under the 61.8% Fibonacci retracement. As we have pointed out before, this is a bullish signal, which suggests higher values of the exchange rate (especially when we factor in the current position of the indictors - they are close to generating buy signals,) in the coming days. If this is the case, the initial upside target would be around 1.1443, where the 23.6% Fibonacci retracement based on the Dec 16-Jan 26 declines is.
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term): In our opinion, no positions are justified from the risk/reward perspective at the moment. However, if we see a confirmation of the above, we’ll consider opening long positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
The situation in the medium-term hasn’t changed much as USD/JPY is still trading between the last week’s high and low, under the 61.8% Fibonacci retracement. Today, we’ll focus on the daily chart.
As you see on the above chart, USD/JPY is still trading in a narrow range, slightly above the upper line of the previous consolidation (marked with blue). Therefore, our last commentary on this currency pair is up-to-date:
(…) a breakout/breakdown will indicate the direction of the future moves. If the exchange rate climbs higher, the initial upside target would be around 120, where the previous highs are. However, taking into account a sell signal generated by the Stochastic Oscillator it seems that we could see a test of the recent lows in the coming days.
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bullish
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.
USD/CHF
The situation in the medium-term has improved once again as USD/CHF extended gains after an invalidation of the breakdown below the Mar 2014 lows.
How did this ove affect the short-term picture? Let’s check.
The first thing that catches the eye on the above chart is a breakout above the resistance zone created by the upper line of the consolidation and the 23.6% Fibonacci retracement (based on the recent decline). Taking this fact into account, we believe that what we wrote on Friday is still valid:
(…) a breakout (…) will be a bullish signal, which would trigger an increase to at least 0.9100, where the 38.2% Fibonacci retracement is. At this point, it’s worth noting that all indicators generated buy signals, supporting the bullish case at the moment.
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
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
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