Earlier today, USD/CHF extended yesterday losses and reached the very short-term support line. Will it withstand the selling pressure in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.2250; the initial downside target at 1.1466)
• GBP/USD: short (a stop-loss order at 1.3773; the initial downside target at 1.3317)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the charts, we see that EUR/USD moved a bit higher earlier today, but did it change anything? In our opinion, it didn’t, because the exchange rate is still trading not only well below the lower border of the brown rising trend channel, but also under the blue resistance line, which means that the head and shoulders formation is underway (and it will be as long as we do not see an invalidation of the breakdown under blue line). Additionally, the sell signals generated by the weekly and daily indicators (except the CCI, which generated the buy signal) remain in cards, supporting currency bears and lower values of EUR/USD.

Taking these facts, we believe that what we wrote yesterday is up-to-date also today:

(…) if EUR/USD declines under the neck line of the pattern (the blue support line based on the previous lows), we’ll see a downward move to around 1.1596, where the size of the move will correspond to the height of the formation.

However, when we take into account a drop under the lower border of the brown rising trend channel and the broader picture of EUR/USD, we think that currency bears push the exchange rate even lower – to around 1.1508, where the size of declines will be equal to the height of trend channel. Taking all the above into account, we believe that our (already profitable) short positions are justified from the risk/reward perspective.

Very short-term outlook: mixed with bearish bias
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short profitable positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1466) 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

From today’s point of view, we see that although USD/CAD climbed above the 23.6% Fibonacci retracement based on the entire May-September downward move, currency bulls didn’t manage to push the exchange rate above the red declining resistance line based on the May and June highs. This show of weakness together with the sell signals generated by the CCI and the Stochastic Oscillator suggest that we’ll see a pullback in the coming days.

If this is the case and USD/CAD declines from current levels, the initial downside target will be around 1.2367, where the previously-broken very long-term blue support line currently is (marked on the monthly chart).

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CHF

On the above charts, we see that although USD/CHF moved higher yesterday, the yellow resistance zone in combination with the 38.2% Fibonacci retracement based on the entire 2017 downward move stopped currency bulls, triggering a pullback. As a result, the exchange rate slipped below the above-mentioned resistances, invalidating the earlier tiny breakouts. Earlier today the pair extended losses and reached the lower border of the blue rising wedge, which could stop further deterioration. Nevertheless, if we see a daily closure below this support line, currency bears could push the exchange rate to the blue support zone (created by the late September lows) in the coming days.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment. 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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