A combination of two Fibonacci retracements, August peaks and interesting reading of the RSI was enough for the bears to come out of hiding and stop their opponents once again. Will we see lower values of USD/CHF in the coming days?

• EUR/USD: short (a stop-loss order at 1.1878; the initial downside target at 1.1343)
• GBP/USD: short (a stop-loss order at 1.3377; the initial downside target at 1.2923)
• USD/JPY: none (in other words, the stop-loss order closed our position with profit)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Yesterday, we wrote the following:

(…) EUR/USD bounced off yesterday’s lows and invalidated the earlier breakdown under the lower line of the consolidation. Additionally, the CCI and the Stochastic Oscillator generated buy signals, which suggests that we’ll see a re-test of the strength of the upper line of the red declining trend channel (…)

On the daily chart, we see that currency bulls took the exchange rate higher (as we had expected) earlier today. Although there was a tiny breakout above the red resistance line it was quite temporary, and EUR/USD came back below it in the following hours.

At the moment of writing this alert, the exchange rate is still trading inside the red declining trend channel and the consolidation, which means that nothing has really changed in the short term.

What’s next? Buy signals suggest that currency bulls will try to go higher (at least) later in the day, however, as long as there is no daily closure above the mentioned resistances we think that reversal and lower values of EUR/USD remain in the cards. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1878 and the initial downside target at 1.1343 are justified from the risk/reward perspective.

GBP/USD

Looking at the daily chart, we see that an invalidation of the tiny breakdown under the lower border of the grey rising trend channel encouraged currency bulls to act. As a result, the exchange rate erased most of the September-October decline and approached the major short-term resistances – upper border of the trend channel and the 38.2% Fibonacci retracement.

Despite this improvement, the exchange rate is still trading under the yellow resistance zone, which was strong enough to stop the bulls in the previous month. Additionally, the CCI and the Stochastic Oscillator climbed to their overbought areas, increasing the probability of reversal in the very near future.

If this is the case and GBP/USD moves lower from current levels, we’ll see (at least) a test of the lower border of the grey rising trend channel in the following days.

Taking all the above into account, we decided to move out stop-loss order a bit higher to avoid closing our short positions if the bulls would like to test the strength of the above-mentioned resistances (all details below).

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.3377 (we decided to move it a bit above the yellow resistance zone) and the initial downside target at 1.2923 are justified from the risk/reward perspective.

USD/CHF

Today’s commentary on this currency pair we start with the quotes from our Tuesday alert:

(…) a climb to the orange resistance zone created by the 78.6%, 78.6% Fibonacci retracements and the August peaks.

(…) the RSI increased above the level of 70 for the first time since May, which doesn’t bode well for further rally. Why? Last time such high readings of the indicator preceded a bigger move to the downside, which suggests that if the history repeats itself once again, we’ll see a reversal and lower values of USD/CHF in the near future.

Additionally, there are bearish divergences between the CCI, the Stochastic Oscillator and the exchange rate, which increases the probability of pro-bearish scenario.

And what could it be like? In our opinion, if currency bulls do not show more strength in the coming days and the pair reverses and drops under yesterday’s low, we’ll likely see a test of the previously-broken red declining line, which serves as the nearest support later this week or at the beginning of next week.

From today’s point of view, we see that the situation developed in line with the above assumptions and USD/CHF declined in recent days. Yesterday, currency bears managed to close the day under the lower border of the blue consolidation, increasing the probability that we’ll see a realization of our Tuesday scenario in the following days.

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

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