The market has dealt us a surprise earlier today, as it likes to do from time to time. The important thing is not to lose one’s cool. For us, it means to objectively assess the current situation and take appropriate and responsible action. See for yourself what it means exactly.

• EUR/USD: short (a stop-loss order at 1.1450; the initial downside target at 1.1260)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: half of short positions (a stop-loss at 0.7228; the exit target at 0.7042)

EUR/USD

Yesterday, EUR/USD verified the breakout above the blue consolidation. Earlier today, the bulls closed their ranks and took the price above the lower border of the brown rising trend channel.

This upswing above the previous top activated the stop-loss order which closed our short positions. Nevertheless, taking into account the proximity to the 618% Fibonacci retracement based on the entire January-February downward move, the blue resistance line based on the January peaks and the current position of the indicators, we think that the space for further gains is limited.

Therefore, reopening short positions is justified from the risk/reward perspective. After all, today’s upswing is in the process of being vigorously rejected and the pair currently trades at around 1.1380. This is what an invalidation of the breakout above any resistance looks like. It increases the likelihood of further deterioration in the coming days. If the pair moves lower from current levels, we’ll likely see not only a test of last week’s lows, but also a drop to the green support zone.

Trading position (short-term; our opinion): short positions with a stop-loss order at 1.1450 and the initial downside target at 1.1260 are justified from the risk/reward perspective.

USD/JPY

Looking at the daily chart, we see that USD/JPY remains stuck in another consolidation between the previously broken lower border of the brown declining trend channel and the upper line of the blue rising trend channel.

Such price action suggests that as long as we do not see a breakout above the blue resistance or a breakdown under the brown support another bigger move will not likely to be seen and short-lived moves in both directions should not surprise.

If the bulls show weakness, the probability of a bigger move down (targeting at least a test of the lower line of the blue trend channel) will increase and we’ll consider opening short positions.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective, but decision to open short positions is potentially just around the corner. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

Looking at the medium-term chart, we see that although the bears pushed USD/CAD lower in the previous week, the proximity to the long-term green support line encouraged the bulls to act.

Taking a closer look, we can notice that something similar happened at the beginning of the month. The history may rhyme again, which suggests higher values of the exchange rate possibly being just around the corner.

This scenario is also reinforced by the daily perspective.

We see that the support zone based on the 76.4% and 78.6% Fibonacci retracements stopped the sellers three times in a row now, which increases the likelihood of another upside move in the near future.

Such scenario will be more likely and reliable only if the bulls manage to take USD/CAD above the upper border of the pink declining trend channel and also above the slightly rising red resistance line. If that happens, we’ll likely see a move targeting the upper blue resistance line that is based on the late-January and mid-February peaks. This would be the neck line of a potential reverse head and shoulders formation that we have marked with appropriate letters for your convenience on the chart.

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