Although the greenback moved higher against the Swiss franc earlier today, two important resistance levels stopped currency bulls. Does it mean that another move to the downside is ahead us?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: short (a stop-loss order at 1.3232; the initial downside target at 1.2375)
- USD/JPY: long (a stop-loss order at 107.62; the initial upside target at 111.16)
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
From today’s point of view, we see that although EUR/USD moved lower earlier today, currency bulls stopped further deterioration, which resulted in a comeback to the lower border of the blue consolidation. On one hand, such price action looks like a verification of the breakdown and suggests lower values of the exchange rate in the following days. On the other hand, the current position of the Stochastic Oscillator suggests that we may see a rebound and a test of the recent highs before a bigger move to the downside. Therefore, taking all the above into account, we believe that waiting at the side lines for a profitable opportunity is justified from the risk/reward perspective at the moment.
Very short-term outlook: mixed
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
Last Monday, we wrote the following:
(…) it seems to us that the par will extend losses and test the 38.2% Fibonacci retracement based on the entire January-May upward move. If this support is broken, we’ll see a decline to the next Fibonacci retracement and the lower border of the brown rising trend channel.
Looking at the daily chart, we see that the situation developed in line with the above scenario and USD/CAD slipped to the 50% Fibonacci retracement based on the entire January-May upward move, approaching the lower border of the brown rising trend channel. As you see, this support area triggered a pullback and a consolidation under the previously-broken 38.2% Fibonacci retracement. What’s next? Taking into account the buy signals generated by the indicators, we think that another move to the upside is just around the corner. However, further improvement will be more likely and reliable if we see a daily closure above the upper border of the blue consolidation (above 1.3491). If we see such development, USD/CAD will likely climb to the orange resistance area or even to the recent highs in the coming week.
Very short-term outlook: mixed
Short-term outlook: mixed with bullish bias
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
Quoting our Thursday’s alert:
(…) USD/CHF broke below the orange support line based on the previous lows and the blue support line. Despite this deterioration, the exchange rate stuck in the blue consolidation slightly above the 70.7% Fibonacci retracement, which could stop further deterioration – especially when we factor in the current position of the daily indicators (they all generated the buy signals) and the red long-term support line seen on the weekly chart (…)
From today’s point of view, we see that the above-mentioned support area stopped currency bears, triggering a rebound. Additionally, USD/CHF broke above the upper border of the blue consolidation, which resulted in a climb to the previously-broken 61.8% Fibonacci retracement and the blue resistance line. As you see, this area stopped further improvement, which means that as long as there is no invalidation of the breakdown under these levels and a daily closure above them another move to the upside is not likely to be seen and a re-test of the recent lows and the red long-term support line (seen on the weekly chart) can’t be ruled out.
Very short-term outlook: mixed
Short-term outlook: mixed with bullish bias
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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