Earlier today, the euro moved higher against the greenback and reached the 61.8% Fibonacci retracement. Despite this improvement, currency bears pushed the exchange rate lower, invalidating the earlier breakout. Will we see EUR/USD below the mid-February highs once again?

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

• EUR/USD: short (a stop-loss order at 1.0810; the initial downside target at 1.0388)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• 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 oved sharply higher on Friday, which resulted in a move above the medium-term red resistance line. With this increase, the exchange rate also climbed to the 61.8% Fibonacci retracement, which paused the rally. In this area, the size of the rebound corresponded to the height of the blue declining trend channel, which alsoreduced the buying pressure. What’s next? Taking all the above into account and the fact that EUR/USD invalidated today’s tiny breakout above the 61.8% Fibonacci retracement, we think that currency bears will push the pair lower in the coing day(s). If this is the case, and the exchange rate invalidates the breakout above the red resistance line ( closing the day below it), we’ll see further deterioration and a test of the recent lows in the following days. This scenaio will be even more likely if the CCI and the Stochastic Oscillator generates the sell signals in very near future.

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 1.0810 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 Friday’s alert:

GBP/USD re-tested the support zone created by the 76.4% and 78.6% Fiboncci retracements and rebounded, which means that closing our short positions and taking profits off the table was a good decision.

On the daily chart, we see that the green support zone together with the lower border of the red declining trend channel (seen on the weekly chart) encouraged currency bulls to act and GBP/USD extended gains earlier today. Additonally, all indicators generated buy signals, whch suggests further improvement and a climb to around 1.2298, where the 38.2% fibonacci retracement and last week’s highs are.

Very short-term outlook: bullish
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.

AUD/USD

Looking at the daily chart, we see that AUD/USD extended gains earlier today, which means that what we wrote on Friday remains up-to-date:

(...) AUD/USD bounced off the green support zone (...) and invalidated the earlier breakdown under the 38.2% Fibonacci retracement, which suggests further improvement and quite likely a verification of the breakdown under the lower border border of the red rising trend chnnel in the coming week.

Very short-term outlook: bullish
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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