The highlight of yesterday’s session was further improvement in the USD Index and the breakout above the upper line of the declining trend channel. How did this event affect the short-term picture of our six currency pairs? When can we expect reversals?
EUR/USD
The most important event of yesterday’s session was the breakdown under the green support zone created by the 38.2% Fibonacci retracement and the March low. This bearish development resulted in a decline, which took the exchange rate to the September 2017 and early January 2018 peaks. This area is also reinforced by the 50% Fibonacci retracement based on the November 2017- February 2018 upward move and the 23.6% retracement based on the entire 2018-2018 increases, which suggests that we could see a reversal in this area in the coming day(s).
GBP/USD
Although EUR/USD declined quite sharply yesterday, we didn’t notice a similar price action in the case of GBP/USD. Instead, the exchange rate slipped under the lower line of the green consolidation (which we marked on the daily chart in our yesterday’s alert) and tested the 70.7% Fibonacci retracement.
Earlier today, we didn’t see any bigger change as the pair is trading (at the moment of writing these words) between the previously-broken lower line of the consolidation and the above-mentioned retracement. Such price action makes the very short-term a bit unclear, but the current position of the indicators (the CCI and the Stochastic Oscillator generated buy signals) suggests that reversal is just around the corner.
USD/JPY
The current picture of the exchange hasn’t changed much since Wednesday as the pair is trading in the upper half of Wednesday’s candlestick. This means that our last commentary remains up-to-date also today:
(…) the pair broke not only above the upper line of the blue consolidation and the September 2017 low, but also above the previously-broken lower border of the blue declining trend channel and the 38.2% Fibonacci retracement. Such price action suggests that we can see one more upswing and a test of the 50% retracement around 109.66 in the coming days.
USD/CAD
Yesterday the pair invalidated the earlier tiny breakdown under the red support line (the neck line of the head and shoulders formation), which triggered a rebound and a comeback to the Wednesday’s high.
Earlier today, the exchange rate moved a bit higher above yesterday’s intraday peak, but despite this fact, the yellow resistance zone (which is currently reinforced by the 61.8% Fibonacci retracement based on the recent March-April decline) continues to keep gains in check. This means that as long as there is no breakout above this area, higher values of USD/AD are not likely to be seen.
Finishing this section, we would like to add that if we see any reliable signs of the buyers’ weakness in this area, we’ll consider re-opening short positions.
USD/CHF
Yesterday, currency bulls showed their strength and pushed the exchange rate above the upper border of the upper border of the pink rising trend channel and the 76.4% and 78.6% Fibonacci retracements, which resulted in a climb to another retracement (88.6%) and the resistance area based on the December 2017 peaks, which were created in the second half of that month.
Although this is a bullish development, we should keep in mind that the RSI increased to the highest level since the beginning of November 2017. Back then, such high reading of the indicator preceded a significant downward move, which in combination with the current situation in two other indicators (the CCI and the Stochastic Oscillator remain in their overbought areas) suggests that we could see a similar price action in the very near future.
If this is the case and we see reliable signs of the bulls’ weakness, similarly to what we wrote in the case of USD/CAD, we’ll consider opening short positions.
AUD/USD
Thursday’s session brought another test of the lower border of the blue declining trend channel, but there was no daily closure below this support line. This is a good sign for currency bulls, which in combination with the current position of the indicators (all daily indicators are remain in their oversold areas, increasing the probability of buy signals n the very near future) suggests that reversal and higher values of AUD/USD are just around the corner. Nevertheless, we want to see the buyers’ strength in this area before we decide to open long positions.
On an administrative note, due to your Editor’s travel plans for the rest of the week, the next few alerts will be shorter than the ones that we’ve been publishing recently. Of course, we will keep an eye on the market and we’ll keep posting the alerts on a daily basis, plus intraday alerts whenever the situation requires it.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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