Earlier today, the U.S. dollar extended gains against its Canadian counterpart, which resulted in a climb to the last week’s highs. Will currency bulls be strong enough to trigger further improvement in the coming days?
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 113.08)
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Looking at the daily chart, we see that the overall situation hasn’t changed much as EUR/USD remains at yesterday’s levels and is still trading in the blue consolidation. Taking these facts into account, we believe that our previous commentary on this currency pair is up-to-date:
(…) EUR/USD came back to the 200% Fibonacci extension, the 70.7% Fibonacci retracement (seen on the weekly chart) and the recent highs. As you see, this resistance area stopped currency bulls once again, which suggests that we’ll see a test of the lower border of the consolidation in the coming day(s). If we see a drop under Tuesday’s low, we’ll consider opening short positions.
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.
GBP/USD
On the weekly chart, we see that GBP/USD remains under the previously-broken upper border of the red declining trend channel and well below the 38.2% Fibonacci retracement. Such situation suggests that the recent upswing could be nothing more than a verification of the earlier breakdown. This scenario is also reinforced by the current position of the weekly indicators as the sell signals continue to support currency bears.
Will the very short-term chart give us more bearish clues about future moves? Let’s check.
From the very short-term perspective, we see that although GBP/USD moved a bit higher in the recent days, the red resistance line based on the previous lows continues to keep gains in check. Such price action looks like a verification of the earlier breakdown, which together with the medium-term picture suggest that lower values of GBP/USD are just around the corner. Taking all the above into account, we think that what we wrote a week ago is still valid:
(…) the exchange rate also broke below the lower line of the blue consolidation, which together with the sell signals generated by the indicators and the medium-term picture suggests further deterioration in the coming week. If this is the case (…) the first downside target will be around 1.2686, where the 38.2% Fibonacci retracement is.
Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed with bearish bias
LT outlook: mixed
Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3232 and the initial downside target at 1.2375) 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
Quoting our last commentary on this currency pair:
(…) 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.
From today’s point of view, we see that USD/CAD broke above the upper border of the blue consolidation (as we had expected), which suggests that our upside target will be in play in the coming days.
Very short-term outlook: bullish
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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