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

• EUR/USD: none
• GBP/USD: none
• USD/JPY: short (a stop-loss order at 114.68; the initial downside target at 111.84)
• USD/CAD: short (a stop-loss order at 1.3401; the initial downside target at 1.2934)
• USD/CHF: short (a stop loss order at 1.0081; the initial downside target at 0.9881)
• AUD/USD: none

EUR/USD

On Friday, EUR/USD declined quite sharply, invalidating the earlier breakout above the previously-broken yellow support line, which in combination with the sell signals generated by the daily indicators doesn’t bode well for currency bulls – especially when we factor in today’s price action. What happened? Earlier today, the buyers pushed the pair above the yellow line once again, but as it turned out this improvement was very temporary, and EUR/USD pulled back, invalidating the breakout for the third time in a row. Such price action increases the probability that we’ll likely see further deterioration and a test of the lower border of the red declining trend channel (or even the recent lows) in the coming days.

GBP/USD

During Friday’s session, GBP/USD slipped under the pink declining trend channel and closed the day below it, which suggests that we can see another downswing and a test of the medium-term blue support line based on the August and late-October lows (or even a drop to the previous lows) in the coming week. This scenario is also supported by today’s price action as currency bulls failed to hold GBP/USD inside the pink channel.

USD/JPY

`Earlier today, USD/JPY moved sharply higher and climbed above the resistance line based on the previous highs. Nevertheless, the exchange rate is still trading under the resistance zone created by the 76.4% and 78.6% Fibonacci retracements and the major resistance zone (marked on the weekly chart in our last week’s alerts), which suggests that reversal and lower values of the exchange rate may be just around the corner.

Nevertheless, to avoid the closure of our positions, we decided to move our stop-loss order to 114.68. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

The situation in the very short term deteriorated slightly after currency bears pushed USD/CAD sharply lower at the end of the previous week. Thanks to their attack, the exchange rate erased most of Tuesday’s upswing and closed the week under the orange zone, invalidating the earlier breakout above it.

Although this is a negative development, we think that it will turn into bearish if the pair drops under the lower border of the pink rising trend channel. If the situation develops in line with this scenario, the way to the previously-broken upper border of the red declining trend will be open.

USD/CHF

USD/CHF moved higher on Friday once again, but despite this increase (which is quite small compared to earlier declines as it didn’t even erase the November 19 drop), the exchange rate is still trading under the previously-broken lower border of the blue rising trend channel and the yellow resistance zone.

This suggests that another attempt to move lower may be just around the corner. If this is the case and the pair reverses from current levels, we’ll likely see a test of the 38.2% Fibonacci retracement or even the mid-October lows in the coming week.

Nevertheless, to avoid the closure of our positions, we decided to move our stop-loss order to 1.0081. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

The overall situation in the short term hasn’t changed much as AUD/USD remains inside the blue consolidation around the green support line based on the previous lows.

On Friday, the exchange rate closed the day below this support, but similar situation we saw on Tuesday, which suggests that as long as there is no breakdown below the lower line of the formation (or a breakout and a comeback above the green line and the orange resistance zone) another bigger move is not likely to be seen.

What could happen if currency bulls show more strength?

In our opinion, if AUD/USD breaks above the nearest resistances, the pair will likely extend gains to around 0.7362-0.7381, where the late-August peaks are (we marked this area with the red dashed horizontal lines).

What could happen if the sellers win?

In the case of such scenario, we’ll likely see a test of the mid-November lows or even the previously-broken upper border of the red declining trend channel (currently around 0.7111) in the following days.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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