Earlier today, the U.S. dollar was trading close to a one week low against the euro and Swiss franc. Additionally, it slipped to a three-week low against the yen as Friday’s weaker-than-expected U.S. employment data for December still weighted on the exchange rate. On the other hand, the U.S currency improved significantly against the Canadian dollar and still remains near a four-year high. The greenback also moved higher against the British pound. Did these moves change the outlook for major currency pairs? If you want to know our take on this question, we invite you to read our today's Forex Trading Alert.
Forex Trading Positions - Summary:
EUR/USD
On the above chart, we see that EUR/USD rebounded on Friday and reached the upper line of a consolidation range. Although we saw two attempts to move higher, the buyers failed. Therefore, a pullback in the coming day/days should not surprise us.
Please keep in mind that as long as the pair remains above the medium-term rising support line (seen on the weekly chart here), the space for further declines is limited. However, if it is broken, the current decline will likely accelerate and the first downside target will be the 38.2% Fibonacci retracement level based on the entire March-December rally (around 1.3457).
Very short-term outlook: mixed
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: bearish
Trading position (short-term): we do not suggest opening any trading positions at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
On the above chart, we see that GBP/USD reversed course and reached an important support line earlier today. Despite this drop, the situation hasn’t changed much from this perspective and what we wrote in our previous Forex Trading Alert remains up-to-date.
(…) the pair still remains above both support lines (the green short-term rising support line and the red long-term support line), which keep declines in check.
Please note that the pair remains in a rising wedge (marked with blue) and it seems that the breakout above the upper border of this formation (or the breakdown below the lower border) will trigger a bigger upside (or downside) move.
Very short-term outlook: mixed
Short-term outlook: bullish
MT outlook: bullish
LT outlook: mixed
Trading position (short-term): we do not suggest opening any trading positions at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
Quoting our last Forex Trading Alert:
(…) it seems that as long as the pair remains below this resistance, the space for further growth is limited and further deterioration in the coming day (or days) should not surprise us.
On the above chart, we see that USD/JPY verified the breakdown below the previously-broken short-term rising line (the breakdown is confirmed) and declined, breaking below last Monday’s low, on Friday. Earlier today, we saw further deterioration as the pair extended its decline. As you see on the above chart, the current correction is bigger than the previous one (marked in blue), which is a bearish signal. Therefore, we will likely see a drop to the 38.2% Fibonacci retracement level in the coming day (or days).
Very short-term outlook: mixed with bearish bias
Short-term outlook: bullish
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): we do not suggest opening any trading positions at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
In our last Forex Trading Alert, we wrote that USD/CAD reached the long-term declining resistance line seen on the weekly chart. Additionally, on the above chart, we clearly see that the pair also reached the upper line of the rising trend channel. On top of that, the position of the indicators will likely encourage sellers to act and stop further improvement. Please note that the RSI and two other indicators are overbought and there are negative divergences between the CCI, Stochastic Oscillator and the exchange rate, which is a bearish signal. Taking these facts into account we may see a reverse of the current rally in the coming day (or days).
Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): we do not suggest opening any trading positions 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 chart, we see that the situation has deteriorated as USD/CHF dropped below the previously-broken short-term declining resistance line based on the September and November highs. However, with this downswing, the pair reached the 38.2% Fibonacci retracement level based on the recent rally. Taking this support into account, we may see an upward corrective move, which will be more likely if the pair invalidates the breakdown below the short-term support/resistance line. In this case, the upside target will be Wednesday’s high.
On the other hand, if this support doesn’t encourage the buyers to act, we will likely see further deterioration (at least) to the upper line of the recent consolidation range (around 0.8965), which intersects with the next Fibonacci retracement.
Very short-term outlook: mixed
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish
Trading position (short-term): we do not suggest opening any trading positions 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
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