Since the beginning of the week AUD/USD remains in a narrow range below the Fibonacci retracement. Where will the exchange rate head next?

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 1.1510)
• GBP/USD: short (a stop-loss order at 1.3773; the initial downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Yesterday, we wrote the following:

(…) EUR/USD increased, but despite this improvement, the exchange rate remains under the neck line of the head and shoulders formation (the blue resistance line). Therefore, we think that this upswing is nothing more than another verification of the earlier breakdown under this line.

From today’s point of view, we see that EUR/USD reversed and declined (as we had expected), which suggests that further deterioration is just around the corner. Therefore, if the exchange rate extends losses from current levels, currency bears will re-test the green horizontal support line based on the mid-August low in the coming week.

Very short-term outlook: bearish
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 1.1510) 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

Looking at the daily chart, we see that GBP/USD extended declines in recent days, which together with the lack of buy signals suggest further deterioration and a realization of our Monday’s pro-bearish scenario in the near future:

If (…) the pair moves lower from current levels, we’ll likely see a decline to the lower border of the brown rising trend channel marked on the weekly chart and the support zone created by the 76.4% and 78.6% retracements (around 1.3000) in the coming week.

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

Trading position (short-term; our opinion): Short profitable positions (with a stop-loss order at 1.3773 and the next downside target at 1.3000) 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.

AUD/USD

On the above chart, we see that the overall situation hasn’t changed much since our last commentary on this currency pair as AUD/USD id still trading in the grey consolidation under the 38.2% Fibonacci retracement. This makes the very short-term situation a bit unclear, however, taking into account the sell signals generated by the CCI and the Stochastic Oscillator it seems to us that the pair will at least a test f the support zone created by the green horizontal lines and the October low of 0.7730 in the coming 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. 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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