Yesterday, the USD Index declined sharply and slipped under the level of 100. How did this drop affect the technical picture of the euro, the Canadian dollar and the Swiss franc?

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: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Yesterday, EUR/USD broke not only above the upper border of the blue consolidation, but also came back above the previously-broken long-term red support/resistance line. With this increase, the exchange rate climbed to the 50% Fibonacci retracement based on the entire March-April downward move, which could stop further improvement – especially when we factor in the fact that the sell signals generated by the weekly indicators remain in place, supporting currency bears. If this is the case, EUR/USD will decline and test the long-term red support/resistance line in the coming day(s).

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.

USD/CAD

Looking at the daily chart, we see that USD/CAD extended gains and broke above the upper border of the brown declining trend channel, which suggests further improvement and a test of the strength of the yellow resistance zone and the April highs. Nevertheless, in our opinion, such price action will be more likely if the exchange rate breaks above the previously-broken lower border of the purple rising wedge seen on the weekly chart below.

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.

USD/CHF

From today’s point of view, we see that currency bears pushed USD/CHF below the lower border of the blue consolidation, which resulted in a decline to the 50% Fibonacci retracement based on the entire recent upward move. Additionally, in this area the size of the downswing corresponded to the height of the consolidation, which suggests that reversal could be just around the corner.

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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