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

• EUR/USD:short (a stop -loss order at 1.1250; the initial downside target at 1.1082)
• GBP/USD: long (a stop-loss order at 1.2802; the initial upside target at 1.3312)
• USD/JPY: short (a fresh stop-loss order at 108.91; the next downside target at 107.72)
• USD/CAD: long (a stop-loss order at 1.2877; the initial upside target at 1.3084)
• USD/CHF: none
• AUD/USD: none

EUR/USD

Let's recall our yesterday's observations:

(...) the buyers extended gains, suggesting we'll likely see a test of the recent highs and the 61.8% Fibonacci retracement in the very near future.

But what about the daily indicators - do they support the upswing? They have generated their sell signals, suggesting that reversal is probably just around the corner.

The situation developed in line with the above assumptions, and EUR/USD reversed after rising up to the resistances. Additionally, the CCI and the Stochastic Oscillator generated their sell signals, increasing the probability of further deterioration in the following days.

Therefore, opening short positions is justified from the risk/reward perspective (all details below). Nevertheless, a bigger move to the downside will be more likely and reliable only if EUR/USD drops below the lower border of the rising green trend channel.

Should we see such price action, the way to the late-December lows would be open.

Trading position (short-term; our opinion): Short positions with a stop -loss order at 1.1250 and the initial downside target at 1.1082 are justified from the risk/reward perspective.

USD/CAD

The Canadian dollar has been going from strength to strength recently, but isn't it time for the greenback to stage a comeback? Let's examine the story the technicals tell...

The first thing that catches the eye on the above chart, is the drop to the long-term green support line based on the previous lows.

When we take a closer look at the chart below, we can see that although the exchange rate moved a bit below this support line, the bulls responded by pushing the pair higher, resulting in the invalidation of the earlier tiny breakdown.

Earlier today, we noticed another move to the upside, which not only invalidated yesterday's drop below the green line, but also the earlier breakdown below the lower border of the declining red trend channel. Both of these invalidations are bullish signs.

Additionally, the current position of the daily indicators suggests that further improvement is just around the corner. Should this be the case and USD/CAD extends gains from here, the initial upside target will be the previously broken black line - that is the neck line of the head and shoulders formation.

Taking all the above into account, opening long positions is justified from the risk/reward perspective. All details below.

Trading position (short-term; our opinion): Long positions with a stop-loss order at 1.2877 and the initial upside target at 1.3084 are justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist