Earlier today, the euro moved a bit lower against the greenback, which resulted in another drop below May highs. Will this time currency bears take control and push the exchange rate lower?

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

From today’s point of view, we see that the overall situation hasn’t changed much as EUR/USD is still trading around the upper border of the blue consolidation (seen on the daily chart) below the yellow resistance zone marked on the weekly chart. Taking this fact into account, we believe that our yesterday’s commentary remains up-to-date:

(…) the yellow resistance zone marked on the weekly chart (…) encouraged currency bears to act, which resulted in a pullback (…) Thanks to this drop, the exchange rate slipped under the previous highs, which is a negative event. (…) if the pair closes today’s session inside the consolidation (…) it will likely trigger further deterioration in the coming days, but until this time, waiting at the sidelines for a profitable opportunity is justified from the risk/reward perspective.

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

Looking at the long-term chart, we see that GBP/USD is still trading around the upper border of the blue consolidation, which makes the situation a bit unclear. Nevertheless, when we take a closer look at the current position of the Stochastic Oscillator, we see that it climbed to the highest level since June 2014. Back then, such high reading of the indicator preceded a significant decline, which suggests thatanother bigger move to the downside may be just around the corner.

Having said the above, let’s focus on the very short-term picture.

From the very short-term perspective, we see that although GBP/USD moved higher in the recent days, the upper border of the brown rising trend channel continues to keep gains in check. Such increase looks like a verification of the earlier breakdown, which together with the current position of the stochastic Oscillator (is very close to generating a sell signal) and the long-term picture suggest that lower values of GBP/USD are just around the corner. If this is the case, and the exchange rate moves lower from current levels, 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

Looking at the daily chart, we see that USD/CAD reversed and declined, which resulted in an invalidation of the breakout above the upper border of the blue consolidation. Additionally, the Stochastic Oscillator generated the sell signal, which suggests further deterioration and a test of the strength of the lower border of the brown rising trend channel in the coming day(s).

Very short-term outlook: bearish
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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts