currency and forex trading

nadia-simmons

GBP/USD – Quick Money

July 9, 2018, 10:05 AM Nadia Simmons

On Friday, GBP/USD verified the earlier breakout above the upper line of the consolidation, which encouraged the buyers to act. Thanks to their determination, the exchange rate reached the first upside target, making the long positions profitable. What’s next?

In our opinion the following forex trading positions are justified - summary:

  • EUR/USD: half of the recent long positions (a stop-loss order at 1.1616; the initial upside target at 1.1825)
  • GBP/USD: none
  • USD/JPY: none
  • USD/CAD: half of recent short positions (a stop-loss order at 1.3503; the initial downside target at 1.3003)
  • USD/CHF: none
  • AUD/USD: none

In other words, we decided to close half our profitable long positions in EUR/USD, take profits off the table in the case of GBP/USD and close half our profitable short positions in USD/CAD.

EUR/USD

EUR/USD - the daily chart

Looking at the daily chart, we see that EUR/USD extended gains earlier today, which suggests that we’ll see a realization of the pro-bullish scenario about which we wrote on Thursday:

(…) yesterday’s breakout above the upper line of the brown triangle and its positive impact on the exchange rate are still in effect, supporting higher values of EUR/USD in the coming day(s).

How high could the pair go?

(…) the breakout above the upper line of the triangle (…) suggests further improvement and a test of the yellow resistance zone in the coming days.

Additionally, in this area, the size of the upward move will correspond to the height of the triangle, which increases the probability that market participants will reach (at least) the level of 1.1825.

Nevertheless, taking into account the current position of the indicators and the proximity to our initial upside target, we believe that closing half of our recent long positions and taking profits off the table is justified from the risk/reward perspective.

Trading position (short-term; our opinion): Half of our recent long positions with a stop-loss order at 1.1616 and an initial upside target at 1.1825 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

GBP/USD - the daily chart

Quoting our Friday’s alert:

(…) GBP/USD moved above the upper line of the blue consolidation (…) which in combination with the medium-term picture suggests that higher values of GBP/USD are just around the corner (…)

(…) how high can this currency pair go in the coming days?

Well, in our opinion, if the exchange rate extends gains from current levels, the initial upside target will be around 1.3340, where the size of the upward move will correspond to the height of the aforementioned consolidation. Therefore, we think that opening long position is justified from the risk/reward perspective.

From today’s point of view, we see that the situation developed in tune with our assumptions and GBP/USD moved higher, reaching our initial upside target earlier today.

So, what’s next?

On the daily chart, we see that thanks to today’s upswing the exchange rate also climbed to the resistance area created by the 23.6% Fibonacci retracement and the previously-broken orange line. As you see this resistance was strong enough to successfully stopped currency bulls June, which suggests that similar price action in this zone can’t be ruled out – especially when we factor in the current position of the daily indicators.

Therefore, connecting the dots, we think that closing our short positions and taking profits off the table is the most sensible decision for this moment.

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/JPY

USD/JPY - daily chart

On the daily chart, we see that overall situation in the short term hasn’t changed much as the currency pair is still trading in a narrow range under the yellow resistance zone based on the previous highs.

Therefore, in our opinion, as long as there is no successful breakout above the above-mentioned resistance or a breakdown below the brown rising support line another bigger move is not likely to be seen and waiting at the sidelines is justified from the risk/reward perspective.

Nevertheless, if we see currency bulls or bears’ weakness, we’ll consider opening next positions. Meanwhile, let’s check our profitable short positions in USD/CAD.

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

USD/CAD - the daily chart

Looking at the daily chart, we see that USD/CAD extended losses below the lower border of the blue consolidation, making our short positions even more profitable.

What can we expect in the coming day(s)? We think that the best answer to this question will be the quote from our last commentary on this currency pair:

(…) taking into account the broader perspective, we think that currency bears will likely try to reach (at least) the lower border of the brown rising trend channel (currently around 1.3018).

Nevertheless, if this support is broken, the way to the barrier of 1.3000 will be open (please note that in this area the size of the downward move will correspond to the height of the consolidation, which increases the likelihood of falling into this level if the bears show their strength and determination by breaking through the lower line of the aforementioned consolidation).

Finishing today’s commentary on this currency pair, we would like to add that USD/CAD is quite close to our initial downside target, which means that closing half of our profitable short positions seems the best decision at the moment.

Nevertheless, in order not to close the road to a potentially higher profit, we leave half of the short positions with the downside target at 1.3003.

Trading position (short-term; our opinion): Half of profitable short positions (with a stop-loss order at 1.3503 and the initial downside target at 1.3003) 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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