Earlier today, the greenback moved lower against the Swiss franc after a verification of yesterday’s breakdown under the lower border of the rising wedge. Will this negative event trigger further deterioration in the coming week?

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

On the above charts, we see that the previously-broken 38.2% Fibonacci retracement (marked on the weekly chart) together with the 23.6% retracement based on the entire April-September upward move encouraged currency bulls to act.

As a result, EUR/USD rebounded slightly, which together with the current position of the daily indicators suggests that we’ll likely see a verification of the breakdown under the neck line (marked with blue on the daily chart) of the head and shoulders formation in the coming days.

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

GBP/USD

On Wednesday, we wrote the following:

(…) Thanks to this week’s drop the exchange rate slipped under the upper border of the brown rising trend channel (marked on the weekly chart), invalidating the earlier breakout. Taking this is a bearish development into account and combining it with the current position of the weekly indicators (they are very close to generating sell signals), we believe that lower values of GBP/USD are ahead of us.

Looking at the charts, we see that although GBP/USD moved a bit higher yesterday, currency bulls didn’t manage to hold gained levels, which resulted in a reversal and decline earlier today. Thanks to this drop the pair erased almost all yesterday’s upswing, which suggests that we’ll see a realization of the pro-bearish scenario from Wednesday:

(…) How low could the pair go? In our opinion, if the exchange rate moves lower from current levels, we’ll see a drop to around 1.3266-1.3291, where the 38.2% Fibonacci retracement based on the August-September upward move and the August high are.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3773 and the initial downside target at 1.3317) 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/CHF

Quoting our last commentary on this currency pair:

(…) currency bulls pushed USD/CHF higher, which resulted in a climb to the yellow resistance zone. In the previous weeks, this area was strong enough to stop currency bulls and trigger a pullback. Additionally, at the moment of writing these words, it is also reinforced by the 38.2% Fibonacci retracement based on the entire 2017 downward move, which suggests that we could see another reversal in the coming days. Nevertheless, taking into account the fact that the CCI invalidated the earlier sell signal (the Stochastic Oscillator is very close to doing the same), it seems that currency bulls will try to break above the yellow zone

From today’s point of view, we see that the situation developed in line with the above scenario and USD/CHF reversed and declined after unsuccessful attempt to move higher. Thanks to yesterday’s drop the exchange rate slipped (and closed the day) below the lower border of the blue rising wedge, which doesn’t bode well for currency bulls – especially when we factor in the fact that the pair verified Thursday’s breakdown earlier today.

What does it mean for USD/CHF? Taking into account the above-mentioned breakdown and the sell signals generated by the CCI and the Stochastic Oscillator, we think that further deterioration is just around the corner. How low could the pair go? In our opinion, if the exchange rate extends declines from current levels, we may see a drop even to around 0.9560, where the size of the downward move will correspond to the height of the formation and where the where the September 15 low is.

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.

Thank you.

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

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