Earlier today, official data showed that Markit’s U.K. construction purchasing managers’ index increased to a seven-month high of 52.8, beating analysts’ expectations. As a result, GBP/USD bounced off session’s lows and approached yesterday’s high. Will we see further improvement in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
From today’s point of view, we see that EUR/USD is still trading between the Monday high and low (in a blue consolidation), which means that our Wednesday’s commentary on this currency pair is up-to-date also today:
(…) the exchange rate remains under the Monday’s high and the 23.6% Fibonacci retracement, which means that further improvement would be more likely and reliable only if the pair climbs and closes today’s session (or one of the following) above these levels. In this case, the next target for currency bulls would be the previously-broken green zone (around Nov low), which serves as the nearest stronger resistance.
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
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.
GBP/USD
Looking at the daily chart, we see that GBP/USD increased and broke above the upper line of the green consolidation, which triggered an increase above the mid-Nov high and the 38.2% Fibonacci retracement. Additionally, the Stochastic Oscillator re-generated a buy signal, which suggests further improvement and a test of the 50% retracement or even the orange resistance zone.
Nevertheless, in our opinion, such price action would be more likely if the exchange rate closes today’s session and the week above the lower border of the red declining trend channel (in this case, we’ll see an invalidation of the breakdown under this line, which would likely trigger further improvement in the coming week).
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
AUD/USD
On Wednesday, we wrote:
(…) the 50% Fibonacci retracement based on the Nov downward move(…) in combination with the proximity to the mid-Nov low triggered a drop earlier today. Additionally, the Stochastic Oscillator is very close to generating a sell signal, which suggests that further deterioration may be just around the corner. If this is the case and the exchange rate extends losses, we may see a test of the Nov 24 low of 0.7362 in the coming days.
As you see on the daily chart, currency bears pushed AUD/USD sharply lower, which approached the exchange rate to our downside target. Despite Wednesday’s decline, the pair rebounded and erased most of this move, which suggests a re-test of the recent highs in the coming days.
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
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, Gold & Silver Fund Manager
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