Earlier today, the U.S. dollar extended gains against its Canadian counterpart as declining crude oil prices pushed the Canadian currency lower. As a result, USD/CAD reached the next resistance zone. Will it stop currency bulls in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.0735; the initial downside target at 1.0388)
• GBP/USD: none, in other words, taking profits off the table is justified from the risk/reward perspective
• USD/JPY: long (a stop-loss order at 111; the initial upside target at 115.43)
• USD/CAD: none, in other words, taking profits off the table is justified from the risk/reward perspective
• USD/CHF: long (a stop-loss order at 0.9891; the initial upside target at 1.0180)
• AUD/USD: none

EUR/USD

Looking at the daily chart, we see that EUR/USD moved a bit lower, extending yesterday’s losses. Additionally, the Stochastic Oscillator generated the sell signal, which suggests that further deterioration is just around the corner. If this is the case, and the exchange rate declines from here, the first downside target will be the previously-broken upper border of the blue declining trend channel (currently around 1.0497) and the recent lows. If they are broken, we’ll likely see a drop to around 1.0460, where the 76.4% and 78.6% Fibonacci retracements are.

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 1.0735 and the initial downside target at 1.0388 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

Quoting our Monday’s alert:

(…) Although the pair rebounded slightly on Friday, the size of the move was tiny compared to the earlier decline, which suggests that we may see a test of the recent low or even a drop to the next downside target – the 70.7% Fibonacci retracement at 1.2194. If it is broken, the way to the next support area (created by the 76.4% and 78.6% Fibonacci retracements around 1.2138-1.2157) will be open. At this point, it is worth noting that in this area is also the lower border of the red declining trend channel (marked on the weekly chart), which increases the probability of reversal.

On the daily chart, we see that currency bears pushed GBP/USD lower (as we had expected) and the pair slipped to our next downside targets. Taking all the above into account, we think that this area could trigger a rebound. Therefore, closing short positions (they were opened when GBP/USD was trading around 1.2383) and taking profits off the table is currently justified from the risk/reward perspective.

Very short-term outlook: mixed
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.

USD/CAD

Yesterday, we wrote the following:

(…) although USD/CAD moved a bit lower on Friday, currency bears didn’t manage to push the pair lower, which resulted in a consolidation around the January 20 high. Taking this fact into account and the current situation in the medium-term chart, we think that currency bulls will push USD/CAD to around 1.3454, where the next resistance zone (created by the 76.4% and 78.6% Fibonacci retracements) is.

From today’s point of view, we see that the situation developed in line with the above scenario and USD/CAD reached our next upside targets. Taking into account the yellow resistance zone, the 161.8% and 73.2% Fibonacci extensions and the current position of the daily indicators (they are very close to generating sell signals), it seems that the exchange rate could correct the recent upward move in the very near future. Therefore, closing long positions (they were opened when USD/CAD was trading around 1.3190) and taking profits off the table is currently justified from the risk/reward perspective.

Very short-term outlook: mixed
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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts