From session to session the British pound is strengthening against the greenback in small steps, but there is something important on the horizon, which could encourage the sellers to act in the following days.

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

• EUR/USD: short (a stop-loss order at 1.1833; the initial downside target at 1.1588)
• GBP/USD: none
• USD/JPY: long (a stop-loss order at 110.21; the initial upside target at 113.50)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (a stop-loss order at 0.7510; the initial downside target at 0.7315)

EUR/USD

Looking at the daily chart, we see that the overall situation in the very short term remains almost unchanged as EUR/USD is wavering around Monday’s low the second day in a row.

Nevertheless, the Stochastic Oscillator generated a sell signal, increasing the probability of another downswing in the very near future. Taking these facts into account, we believe that what we wrote yesterday is up-to-date also today:

(…) Thanks to the sellers’ attack EUR/USD came back under 1.7000, the RSI and the CCI turned south, while the Stochastic Oscillator is very close to generate a sell signal (we’ll likely see it later in the day).

Additionally, (…), we can observe a potential pro-bearish head and shoulders formation. If this is the case, currency bears are just forming the right arm of the pattern, which will likely take EUR/USD to (at least) the neck line marked with orange (and based on the previous lows) in the following days.

Trading position (short-term; our opinion): short positions with a stop-loss order at 1.1833 and the initial downside target at 1.1588 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

From the daily perspective, we see that GBP/USD extended Friday’s move to the upside and almost touched the previously-broken blue support line (seen more clearly on the weekly chart). Earlier today, the pair moved a bit higher once again, which looks like a verification of the last week’s breakdown under this important line.

If the situation develops in line with the above assumption, currency bears will likely be more active in this area, which should push the pair lower in the very near future.

How low could GBP/USD go in the case of a pro-bearish scenario? In our opinion, we’ll likely see not only a test of the recent lows, but also a drop to around 1.2896, where the 61.8% Fibonacci retracement (based on the entire January 2017 – March 2018 upward move) is.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. But if we see currency bulls’ weakness here, we’ll consider opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

Looking at the above chart, we can summarize it in four words: more of the same. Why? Because earlier today, the orange resistance zone stopped currency bulls once again, showing their weakness and encouraging their opponents to act.

Thanks to their action AUD/USD erased around 50% of the recent rebound, which suggests that further deterioration and (at least) a decline to the lower border of the blue declining trend channel is very likely in the coming week.

Additionally, it is also worth keep in mind that as long as there is no successful breakout above the orange resistance zone a bigger move to the north is not likely to be seen and short-lived moves in both directions should not surprise us.

Trading position (short-term; our opinion): short positions with a stop-loss order at 0.7510 and the initial downside target at 0.7315 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