Earlier today, the U.S. dollar declined from a two-month high against the euro and gave up the gains against its Canadian counterpart. The greenback also slipped lower against other major currencies, however, we should keep in mind that trade volumes remain thin as markets in the U.S. are closed for a holiday. What impact did it have on major currency pairs? If you want to know our take on this question, we invite you to read our today's Forex Trading Alert.

Forex Trading Positions - Summary:

• EUR/USD: short position (stop-loss level: 1.3699)
• GBP/USD: short position (stop-loss level: 1.6515)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: long position (stop-loss level: 0.8985)
• AUD/USD: none

EUR/USD

Quoting our last Forex Trading Alert:

(…) if EUR/USD declines below Friday’s low at 1.3573 (…) we will likely see further deterioration – especially when we take into account the fact that such a drop will also mean a decline below the medium-term rising support line. In this case, the first downside price target will be around 1.3457 (this level intersects with the 38.2% Fibonacci retracement level based on the entire March-December rally).

As you see on the above charts, EUR/USD declined sharply below major support lines (the medium- and the short-term one) on Friday and reached the 61.8% Fibonacci retracement level. Although this strong support encouraged buyers to act, the upswing corrective move is still too shallow to say that the situation has improved. From this perspective, we clearly see that the pair hasn’t even reached the previously-broken lower border of the consolidation range (not to mention an increase above the medium-term support/resistance line). Therefore, as long as the pair doesn’t invalidate the breakdowns below these levels further deterioration is likely to be seen.

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

Trading position (short-term): short. The stop-loss level for this position is at 1.3699. The first downside price target is around 1.3457. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

GBP/USD

Looking at the above chart, we see that the situation hasn’t changed much. Although GBP/USD reversed course and rebounded during the early European session on Friday, the pair gave up the gains in the following hours and dropped to the previously-broken lower border of the rising wedge and short-term declining support line. From this perspective, the breakdown below these lines was not invalidated, which is a bearish sign. Additionally, earlier today we saw another attempt to move higher, however, it seems that the sellers keep further gain in check. Therefore, as long as the pair remains below the upper line of the consolidation range further deterioration is likely to be seen – especially if GBP/USD closes the day below the lower border of the rising wedge and the short-term declining support line once again.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term): short. The stop-loss level for this position is at 1.6515. The first downside price target is around 1.6190. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/JPY

Quoting our previous Forex Trading Alert:

(…) the pair not only closed below 104.91 yesterday, but it also remains below this level today. Taking this fact into account, we maintain our yesterday’s assumption that a pause or even a pullback in the coming days is quite likely.

Looking at the above chart, we see that recent days have formed a consolidation on the chart. Earlier today, the pair broke below Thursday’s low (which also indicates the lower border of a consolidation range) and extended losses. Additionally, the Stochastic Oscillator generated a sell signal, which is a bearish signal. Taking these facts into account, we may see further deterioration in the near future.

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

Trading position (short-term): we do not suggest opening any trading positions at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

On the above chart, we see that Friday’s attempt to break above the upper line of the rising trend channel failed and USD/CAD still remains slightly below this strong resistance line. Taking this fact into account and combining it with the position of the indicators, it seems that further deterioration is just around the corner. Please note that the RSI is still overbought and sell signals generated by two other indicators remain in place supporting the bearish case.

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

Trading position (short-term): we do not suggest opening short positions yet because the pair hasn’t invalidated a small breakout above the long-term declining support/resistance line on the weekly chart and this line still serves as support. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CHF

Looking at the above chart, we see that the situation hasn’t changed much. Although USD/CHF extended gains, the buyers only managed to push the exchange rate slightly above the Jan. 8 high. After this very temporary improvement, the pair came back to a consolidation range slightly above the short-term declining support/resistance line. This is not a bullish sign- especially when we factor in the position of the indicators. The CCI and Stochastic Oscillator are overbought, while the RSI remains slightly below the level of 70, which suggests that a pause or even a correction is just around the corner.

Nevertheless, a current corrective move is quite shallow at the moment, and the pair remains above the very short-term support/resistance line (marked in green) which is a positive sign that may encourage buyers to act once again.

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

Trading position (short-term): long. The stop-loss level for this position is at 0.8985. The upside price target is around 0.9160. 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 although AUD/USD rebounded earlier today, the situation hasn’t changed much. Despite a small increase, the pair still remains not only below the previously-broken very short-term support line, but also the December low. From this persective, it seems that this increase may be nothing more than the veryfication of the breakdown (below the previous low). If this the case, another downswing should not surprice us and the next price target will be the 78.6% Fibonacci retracement, which intersects with the lower border of the declining trend channel. However, when we take a closer look at the position of the indicators, we see that the CCI and Stochastic Oscillator are overbought and the RSI remains slightly above the level of 30, which suggests that a pause or an upswing is just around the corner.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish

Trading position (short-term): we do not suggest opening short positions at the moment as it seems that the space for further declines is limited by the strong support zone created by the 78.6% Fibonacci retracement and the lower border of the declining trend channel. 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
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