Yesterday, the Australian dollar dropped against the greenback to the lowest level since months. How low could AUD/USD g in the coming days?

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 next downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Although EUR/USD slipped slightly below the upper border of the purple trend channel yesterday, currency bulls reacted very quickly which resulted in an invalidation of this tiny drop. Earlier today, the exchange rate moved a bit higher, but as you see on the charts, it is still trading under the 50% Fibonacci retracement and the lower border of the orange resistance zone. Additionally, sell signals generated by the monthly and daily indicators remain in play, which increases the probability that another move to the downside may be just around the corner.

If this is the case, we’ll see another test of the strength of the upper border of the purple trend channel. Will we see further deterioration? In our opinion, such price action will be more likely and reliable if EUR/USD closes one of the following sessions under the upper purple line and invalidates the earlier breakout above. In this case, currency bears will likely not only test the green horizontal line, but also push the pair to the 38.2% Fibonacci retracement.

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

Trading position (short-term; our opinion): Profitable short 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.

USD/CAD

From today’s point of view, we see that the medium-term picture remains almost unchanged as USD/CAD is still trading in the blue consolidation. This suggests that as long as there is no breakout above the upper border of the formation or a breakdown under the lower line, the situation will remain a bit unclear and short-lived moves in both directions should not surprise us.

Will the very short-term chart give us more clues about future moves? Let’s check.

Looking at the daily chart, we see that although USD/CAD bounced off the lower border of the purple rising trend channel on Monday, the orange resistance zone created by the 61.8% Fibonacci retracement and the previous highs stopped further improvement, triggering a pullback. As a result, the exchange rate not only came back to the above-mentioned support line, but currency bears managed to push the pair below it earlier today. In our opinion, this is a negative development, which will turn into bearish if we see a daily closure under this important support line.

What could happen if we see such price action? Taking into account the current level of the indicators, we think that USD/CAD will not only test the November lows, but also decline to the 38.2% Fibonacci retracement in the following days. At this point it is worth noting that in this area we can also notice the October 6 and the October 17 highs, which together could pause further deterioration. Nevertheless, if currency bulls fail here, we may see a decline even to around 1.2431-1.2487, where the next Fibonacci retracement and mid-October lows are.

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

Looking at the daily chart, we see that although USD/CHF increased slightly on Monday, this improvement was temporary and currency bears triggered another pullback in the following days. Taking this fact into account, we think that we’ll see a realization of our pro bearish scenario from our last commentary on this currency pair:

(…) currency bulls didn’t manage to push the pair higher, which encouraged their opponents to act. As a result, the pair reversed and declined on the following day, which suggests that we’ll likely see a test of the last week low or even a drop to 38.2% Fibonacci retracement in the coming week.

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.

AUD/USD

Looking at the daily chart, we see that although AUD/USD increased a bit yesterday, currency bears managed to erase some of this gain earlier today, which suggests that one more downswing may be just around the corner. If this is the case, we’ll likely see a test of the support area created by the 76.4% and 78.6% Fibonacci retracements, which is currently reinforced by the lower border of the brown rising trend channel and the 50% Fibonacci retracement (we marked them with the blue ellipse on the weekly chart).

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.

On an administrative note, the markets in the U.S. will be closed on Thursday and we expect the trading activities to be limited on Friday as well. Consequently, there will be no regular Forex Trading Alerts on Thursday and Friday. However, if something urgent happens, we will provide you with a quick alert anyway. The alerts will be posted normally beginning on Monday, November 27.

Thank you.

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

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