Yesterday, the major short-term resistance zone triggered a sharp decline in USD/CHF, but will we see lower values of the exchange rate in the coming days?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: short (a stop-loss order at 1.3272; the initial downside target at 1.2375)
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
From today’s point of view, we see that the overall situation hasn’t changed much as EUR/USD is still trading under the previously-broken 38.2% Fibonacci retracement and the 112.8% Fibonacci extension. Although the pair invalidated the earlier breakout, the current price action is very similar to what we saw in the previous week. Therefore, in our opinion, the above-mentioned invalidation of the breakout will turn into bearish signal (and will be more reliable) only if we see a weekly closure below these levels. Until this time another rebound (similar to what we saw in the previous week) can’t be ruled out.
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
On Monday, we wrote the following:
(…) the exchange rate is still trading below the 23.6% Fibonacci retracement based on the entire May-July downward move. Additionally, the CCI and the Stochastic Oscillator generated the sell signals, which suggests that we may see further deterioration in the coming days - especially when we factor in the blue resistance zone created by the June 2016 lows (marked on the weekly chart).
Looking at the charts, we see that the situation developed in line with the above scenario and currency bears pushed USD/CAD lower. Thanks to yesterday’s sharp decline the exchange rate hit a fresh weekly low, which together with the sell signals generated by the indicators suggests attempt to move lower.
How low could the pair go in the coming days? We believe that we’ll see a realization of our Monday’s scenario:
If (…) USD/CAD reverses and decline, we will likely see a test of the green support zone (seen on the daily chart) and the lower border of the green declining wedge in the following days.
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
Quoting our Tuesday’s alert:
(…) the exchange rate extended gains and climbed to the yellow resistance zone once again. Although this is a positive development, we should keep in mind that we saw similar price action several times in the previous weeks. Therefore, in our opinion, a bigger move to the upside will be more reliable only if USD/CHF breaks above this major resistance area. Until this time, one more pullback can’t be ruled out.
On the daily chart, we see that the yellow resistance zone stopped currency bulls once again (as we had expected), which resulted in a sharp pullback yesterday. Additionally, the CCI and the Stochastic Oscillator generated the sell signals, which suggests that another downswing is just around the corner. If this is the case and the pair declines from current levels, the initial downside target will be the last week low of 0.9582.
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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