Earlier today, official data showed that China’s imports and exports declined less than expected, while country’s trade surplus widened to $60.09 billion in December. Thanks to these numbers, AUD/USD extended gains and approached the first resistance. Will we see further improvement in the coming days?

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

• EUR/USD: short (stop-loss order at 1.1363; initial downside target at 1.0462)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

On Monday, we wrote:

(…) EUR/USD broke above the upper border of the declining trend channel. Despite this improvement, the exchange rate reversed and declined, invalidating earlier breakout. This is a bearish signal, which in combination with the medium-term picture and the current position of the daily and weekly indicators (the weekly Stochastic Oscillator generated a sell signal, while the daily indicator is very close to doing the same) suggests further deterioration and another test of the green zone in near future.

Looking at the daily chart, we see that currency bears pushed the pair lower as we had expected and the exchange rate slipped under our downside target. Taking this negative signal (which will be even more bearish if the pair closes the day below it) into account and combining it with sell signals generated by the indicators we think that further deterioration is just around the corner. Therefore, if the pair extends losses from here, we’ll see a drop to (at least) the last week’s low.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.1363 and the initial downside target at 1.0462) 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.

USD/CAD

Quoting our last commentary on this currency pair:

(…) we think that the pair will drop to the previously-broken upper line of the blue trend channel in near future. If it withstands the selling pressure, we’ll likely see a fresh multi-year high (…)

As you see on the daily chart, the situation developed in line with the above scenario and currency bulls pushed the exchange rate to a fresh 2016 high.

What impact did this move have on the long-term chart? Let’s check.

The first thing that catches the eye on the above chart is a breakout above the orange resistance zone, which is a positive signal that suggests further improvement and an increase to around 1.4509-1.4658, where the next resistance area is. Nevertheless, before we see such price action, a corrective pullback from current levels should not surprise us.

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

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.

AUD/USD

On the above charts, we see that AUD/USD extended gains and climbed above the Monday’s high, which suggests that our last commentary is up-to-date:

(…) AUD/USD invalidated the breakdown under the orange line and bounced off session’s low. Taking these facts into account, and (…) the current position of the daily indicators, it seems that further improvement is just around the corner. If this is the case, and the exchange rate increases from here, the initial upside target would be around 0.7079, where the 38.2% Fibonacci retracement (based on the recent downward move) is.

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed with bullish bias
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

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