Earlier today, the Australian dollar extended gains against its U.S. counterpart, which pushed AUD/USD to a fresh 2017 high. Will the exchange rate move higher in the coming days?

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: short (a stop-loss order at 1.2576; the initial downside target at 1.2157)
• 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 although EUR/USD moved higher earlier today, currency bears didn’t give up and pushed the pair slightly below the orange resistance zone, which means that what we wrote on Friday remains up-to-date:

(…) in our opinion, the space for gains is limited as the upper border of the orange rising trend channel and the orange resistance line based on the previous highs are not far from current levels. Additionally, the CCI and the Stochastic Oscillator climbed to their overbought areas, which increases the probability of reversal – especially when we factor in the proximity to the yellow resistance zone marked on the weekly chart.

On top of that, when we take a look at the long-term chart, we’ll see one more bearish factor.

From this perspective, we see that the exchange rate approached the previously-broken long-term green line, which looks like another verification of the earlier breakdown. If this is the case, EUR/USD will reverse and decline from current levels 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

Looking at the weekly chart, we see that the last week’s increase took GBP/USD to the previously-broken lower border of the blue consolidation. Such move looks like a verification of the earlier breakdown. Will it trigger a reversal? Let’s examine the very short-term picture and find out.

Quoting our Thursday’s alert:

(…) What’s next? Taking into account the fact that the buy signals generated by the indicators are still in play, we think that anther upswing and a test of the strength of the orange resistance zone should not surprise us in the coming day(s).

On the daily chart, we see that GBP/USD moved higher as we had expected. Thanks to this increase, the exchange rate climbed above the orange resistance zone earlier today, but despite this improvement, currency bulls didn’t manage to hold this level, which resulted in a pullback and a comeback under the orange zone. Taking this negative event and the current position of the indicators (the CCI and the Stochastic Oscillator are very close to generating sell signals) into account, we think that lower values of the exchange rate are just around the corner. If this is the case and GBP/USD closes today’s session under the resistance, invalidating the earlier breakout, we’ll see a decline to the recent lows. Therefore, opening short positions is justified from the risk/reward perspective.

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 1.2576 and the initial downside target at 1.2157) 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

Quoting our last commentary on this currency pair:

(…) With the recent upward move, the exchange rate not only increased to our upside target, but also climbed above it, invalidating the earlier breakdown. This is a bullish development, which suggests further improvement and a test of the recent highs (especially when we factor in the fact that there are no sell signals at the moment of writing these words) in the coming days.

From today’s point of view, we see that the situation developed in line with the above scenario and AUD/USD not only reached the February high, but also climbed slightly above it. Despite this bullish event, the pair gave up some gains and slipped below the previous high, invalidating the earlier breakout. Additionally, the CCI and the Stochastic Oscillator are very close to generating sell signals, which increases the probability of another downward move. Therefore, if AUD/USD closes today’s session under the February low, we’ll likely open short positions, because the initial downside target will be the March low and the green support zone.

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

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. However, if AUD/USD closes today’s session under the February low, we’ll likely open short positions. 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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