Earlier today, the Australian Bureau of Statistics reported that new motor vehicle sales dropped by 1.5% in the previous month. Thanks to these disappointing numbers and a stronger greenback, AUD/USD slipped under 0.8000. Will we see further deterioration in the coming week?

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

• EUR/USD: Short positions (stop-loss order at 1.1667)
• GBP/USD: Short positions (stop-loss order at 1.5913)
• USD/JPY: none
• USD/CAD: Long positions (stop-loss order at 1.1706)
• USD/CHF: none
• AUD/USD: Short positions (stop-loss order at 0.8194)

EUR/USD

The situation in the medium-term perspective hasn’t changed much as EUR/USD still remains above the previously-broken 23.6% Fibonacci retracement. Nevertheless, the orange resistance zone triggered a pullback, which suggests that we could see a reversal in the coming week.

Are there any short-term factors that could encourage currency bears to act? Let’s take a closer look at the daily chart and find out.

From this perspective we see that the resistance area created by the mid-Feb highs and the dashed orange resistance line stopped further improvement, triggering a pullback earlier today. Taking this fact into account, and combining it with the proximity to the orange resistance zone (created by the 50% Fibonacci retracement and the Feb highs) and the current position of the indicators (they all generated sell signals), it seems that further deterioration is just around the corner. If this is the case, and the exchange rate moves lower form here, the initial downside target would be around 1.1184, where the dashed orange support line currently is.

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

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1667 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.

GBP/USD

Looking at the daily chart, we see that GBP/USD extended losses, which in combination with the current position of the indicators (they all generated sell signals) suggests that further correction of the recent rally more likely than not. If the pair moves lower from here, the initial downside target would be around 1.5518, where the 23.6% Fibonacci retracement (based on the entire Apr-May rally) is. If it is broken, the next target would be the 38.2% Fibonacci retracement (around 1.5337) or even the 50% retracement (around 1.5190).

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

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.5913 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

AUD/USD moved lower and slipped to the 23.6% Fibonacci retracement. If the exchange rate invalidates earlier breakout above this level, correction of the recent rally will likely accelerate (especially if weekly indicators generate sell signals in the coming week).

How low could the pair go in the coming days? Let’s examine the daily chart and find out.

Although AUD/USD moved little higher on Friday the pair reversed and declined earlier today. With this downswing the exchange rate slipped to the recent low, which in combination with the current position of the indicators (sell signals remain in place, supporting the bearish case) suggests that further deterioration is just around the corner. If this is the case, and the pair moves lower from here, the initial downside target would be the brown rising support line (around 0.7931). If it is broken, the next target will be around 0.7920, where the 38.2% Fibonacci retracement levels (based on the entire Apr-May rally) is.

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

Trading position (short-term; our opinion): Short positions with a stop-loss order at 0.8194 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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