On Monday, currency bulls extended the last week’s rebound and climbed to the first important Fibonacci retracement. Despite this improvement, the following sessions didn’t confirm their strength. Does this mean that bears will take control again on the trading floor in the coming days?

• EUR/USD: short (a stop-loss order at 1.1878; the initial downside target at 1.1343)
• GBP/USD: short (a stop-loss order at 1.3377; the initial downside target at 1.2923)
• USD/JPY: long (a stop-loss order at 111.11; the initial upside target at 113.40)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (with a stop-loss order at 0.7208; the initial downside target at 0.7051)

EUR/USD

In our last alert, we wrote the following:

(…) although EUR/USD broke above the upper line of the consolidation during yesterday’s session, this improvement was quite temporary and very similar to what we already saw during recent days. (…) Because (…) currency bulls didn’t manage to hold gained levels, which resulted in another invalidation of the breakout and a comeback into consolidation.

(…) Additionally, the sell signal generated by the Stochastic Oscillator remains in the cads, while the CCI increased to the level of 100, suggesting that the space for gains may be limited and another reversal from this area should not surprise us in the very near future.

On the daily chart, we see that the situation developed in line with the above scenario and EUR/USD closed yesterday’s session under the upper line of the consolidation. This negative development encouraged currency bears to act, which resulted in further deterioration during today’s session.

Thanks to the sellers’ attack the exchange rate slipped to the previously-broken upper border of the red declining trend channel, which in combination with the sell signals generated by the indicators (the CCI joined the Stochastic Oscillator and also generated a sell signal) suggests that we’ll see an invalidation of the earlier breakout above this line later in the day.

If the situation develops in line with the above assumption, the way to the lower border of the consolidation will be open.

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1878 and the initial downside target at 1.1343 are justified from the risk/reward perspective.

GBP/USD

The first thing that catches the eye on the weekly chart is another invalidation of the earlier tiny breakout above the orange line. As you see, currency bulls have quite big problems with this resistance for many weeks, which increases its importance for the future of this currency pair.

In other words, we believe that as long as there is no successful breakout above it lower values of GBP/USD are more likely than another upswing. This scenario is also reinforced by the sell signal generated by the Stochastic Oscillator and the shrt-term picture of the exchange rate.

Why? Let’s take a look at the daily chart below.

From this perspective, we see that although GBP/USD extended Monday’s upswing and closed the orange gap yesterday, the buyers were not strong enough to keep gained levels, which resulted in quite a sharp drop during today's session.

Thanks to this price action the pair erased almost entire recent rebound, which together with the sell signals generated by the indicators increases the probability od another test od the lower border of the grey rising trend channel in the very near future – especially when we factor in the above-mentioned medium-term picture of GBP/USD.

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.3377 and the initial downside target at 1.2923 are justified from the risk/reward perspective.

AUD/USD

Looking at the daily chart, we see that although AUD/USD climbed to the 38.2% Fibonacci retracement on Monday, currency bulls didn’t manage to trigger further improvement in the following days.

Earlier today, we noticed one more upswing, which took the pair above this resistance, however, as it turned out it was very temporary, and the exchange pulled back in the following hours.

Additionally, the Stochastic Oscillator climbed to its overbought area and is very close to generate a sell signal, which increases the likelihood of another decline. If this is the case and we see such price action, AUD/USD will likely test the recent lows in the coming day(s).

Taking all the above into account, we think that opening short positions is justified from the risk/reward perspective. All needed details, you will find below.

Trading position (short-term; our opinion): Short positions with a stop-loss order at 0.7208 and the initial downside target at 0.7051 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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