In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (a stop-loss order at 1.0967; the initial downside target at 1.0521)
- GBP/USD: short (a stop-loss order at 1.2738; the downside target at 1.2157)
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
Before we examine the current situation in our currency pairs, please note that we closed our profitable long positions in USD/CHF and short positions in AUD/USD and took profits off the table.
EUR/USD
Looking at the charts, we see that the situation hasn’t changed much since yesterday, therefore our last commentary is still valid:
The first thing that catches the eye on the weekly chart is an invalidation of the earlier breakout above the long-term red support/resistance line based on the March 2015 and November 2015 lows, which is a bearish development. Additionally, the CCI and the Stochastic Oscillator generated the sell signals, increasing the probability of further declines.
How did this drop affect the very short-term picture?
(…) EUR/USD closed Friday’s session under the red support/resistance line. Earlier today, the exchange rate moved a bit higher but then reversed and declined, which looks like a verification of the Friday’s breakdown.
Taking this fact and the long- and medium-term pictures into account, we think that lower values of EUR/USD are more likely than not. Therefore, if the pair extends losses, (…) the initial downside target for currency bears will be around 1.0521 (slightly above the late February and March lows).
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 1.0967 and the initial downside target at 1.0521) 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
On the above charts, we see that although GBP/USD rebounded slightly yesterday, the pair remains in the blue consolidation under the yellow resistance zone. Additionally, the sell signals generated by the indicators are still in play, which suggests another downswing and (at least) a drop to around 1.2333-1.2338, where the March 20 and the March 21 lows are. If this support is broken, we’ll see a decline to the March lows and the green support zone in the following days.
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 1.2738 and the 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.
USD/CHF
Yesterday, we wrote the following:
(…) USD/CHF broke above the 38.2% Fibonacci retracement based on the entire December – March downward move, which suggests a climb above Monday’s peak. If we see such price action, the next upside target will be the 50% retracement or even the orange declining resistance line based on the January and March highs in the coming days (currently around 1.000). Nevertheless, the current position of the indicators suggests that reversal in the coming days is likely.
From today’s point of view, we see that the situation developed in line with the above scenario and USD/CHF climbed to the 50% retracement, but then pulled back and gave up some gains. Earlier today, we saw similar problems with further rally, which raises doubts about currency bulls’ strength. Taking this fact into account and the sell signals generated by the indicators, we think that closing long positions and taking profits off the table is justified from the risk/reward perspective. Nevertheless, if we see any important bullish development, we’ll likely re-open long positions.
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.
AUD/USD
Quoting our yesterday’s alert:
(…) AUD/USD extended declines and approached the green support zone, which triggered a small rebound earlier today. Despite this move, the sell signals generated by the indicators remain in place, which suggests that (a least) one more downswing is still ahead us. If this is the case, and the exchange rate moves lower, we’ll see a test the 38.2% Fibonacci retracement in the following days.
Looking at the charts, we see that AUD/USD moved lower earlier today once again and almost touched our downside targets, which suggests that reversal is just around the corner. This scenario is also reinforced by the fact that the current downswing is very similar to what we saw at the end of March, which increases the probability of rebound. Taking the above into account, we think that closing short positions and taking profits off the table is justified from the risk/reward perspective. Nevertheless, if we see any important bearish development, we’ll likely re-open short positions.
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
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