Earlier today, the Australian dollar moved sharply lower against its U.S. counterpart, which resulted in a fresh November low and a drop to the support zone. Will it manage to stop currency bears 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

Looking at the daily chart, we see that currency bulls pushed EUR/USD above the upper border of the purple declining trend channel and the 38.2% Fibonacci retracement yesterday. Thanks to this action, the exchange rate extended gains and approached October highs (and the orange resistance zone marked on the long-term chart), but there was no breakout above them, which resulted in a reversal and a comeback below the 50% retracement.

What’s next? The current position of the CCI and Stochastic Oscillator (they are overbought and very close to generating sell signals) suggests that further declines are just around the corner.

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/JPY

On Thursday, we wrote the following:

(…) the exchange rate slipped under the upper border of the purple rising trend channel and the long-term red declining resistance line (both marked on the daily chart), which suggests a test of the October 31 low or even a decline to the lower border of the purple rising trend channel (currently around 111.83) in the following days.

Looking at the chart, we see that USD/JPY verified the earlier breakdown under the upper border of the purple rising trend channel, which resulted in a pullback yesterday. Earlier today, currency bears pushed the exchange rate under the long-term red declining resistance line, triggering a sharp decline, which took the pair below our first downside target. Taking this negative development into account, it seems that we may see continuation of the downward move and a test of our next downside target - the lower border of the purple rising trend channel (currently around 111.92) 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.

AUD/USD

Quoting our Forex Trading Alert posted on November 7:

(…) AUD/USD approached the last week lows yesterday. Although this area encouraged currency bulls to act, the pair reversed and declined earlier today, which together with the sell signal generated by the Stochastic Oscillator increases the probability of one more downswing and a test of the October low in the very near future.

Looking at the daily chart, we see that the situation developed in line with the above scenario and AUD/USD extended losses after a comeback below the blue support line. This factor encouraged currency bears to act, which resulted not only in a test of the October low, but also in a decline below this support. Thanks to this drop the exchange rate slipped to the green support zone, which could trigger a rebound in the coming days. Nevertheless, as long as there are no buy signals generated by the indictors, one more move to the downside and a test of the late June low of 0.7533 or even the support area created by the 76.4% and 78.6% Fibonacci retracements can’t be ruled out.

Very short-term outlook: mmixed 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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