Earlier today, the U.S. currency rose against most of major currencies as expectations that the Federal Reserve will continue to scale back stimulus program this week fueled demand for the greenback. What impact did these moves 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
Looking at the above chart, we see that EUR/USD extended declines and broke below the 38.2% Fibonacci retracement level based on the recent rally and the medium-term rising support line (seen more clearly on the chart below). This is a bearish sign – especially when we factor in sell signals generated by the CCI and Stochastic Oscillator. As you see on the above chart, with this downswing the pair reached the 50-day moving average and approached the next Fibonacci retracement, which triggered a corrective upswing. Nevertheless, this move doesn’t change anything because all the above negative signals support the bearish case at the moment.
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: mixed
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.
GBP/USD
Quoting our last Forex Trading Alert:
(…) GBP/USD approached the upper border of the rising wedge once again. At this point, it’s worth noting that we had already seen similar price action in the previous week. Back then, after a small breakout above this resistance line, the pair gave up the gains and reversed. If history repeats itself once again, we will likely see similar price action in the coming day (or days).
As you see on the above chart, we actually saw such price action earlier today. From this perspective, it seems that as long as GBP/USD remains in a rising wedge (marked with blue), we won’t see bigger upside (or downside) move. However, taking into account the fact that the upper and lower border of the rising wedge approaching each other, it seems that a breakthrough is just around the corner.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
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/JPY
As you see on the above chart, USD/JPY rose earlier today and invalidated the breakdown below previous lows, which is a bullish signal. Additionally, the CCI and Stochastic Oscillator generated buy signals. Connecting the dots, what we wrote in our last Forex Trading Alert, remains up-to-date:
(…) if the pair extends its upswing, we will likely see further improvement and the first upside target will be Friday’s high.
Please note that if this resistance is broken, the next target for the buyers will be the very short-term declining line (marked with red) slightly below the Jan. 23 high.
Very short-term outlook: bullish
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 USD/CAD bounced off the upper line of the rising trend channel (in our last Forex Trading Alert we emphasized that this strong support line keeps further declines in check) and erased 50% of earlier losses. This is a positive sign, which will likely trigger further improvement (at least) in the following hours and the first upside target will be the annual high at 1.1172.
Nevertheless, we should keep in mind that the CCI and Stochastic Oscillator generated sell signals and the RSI is still overbought, which supports the bearish case. If the pair invalidates the breakout above the upper line of the rising trend channel, we will consider opening short positions.
Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): we do not suggest opening any positions at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
On the above chart, we see that the situation has improved as USD/CHF extended gains earlier today. With this upswing, the pair came back above previous lows and the short-term declining support/resistance line, which is a positive sign. Additionally, the pair broke above Friday’s high (which is also the upper border of a consolidation range). According to theory, such price action will likely trigger further improvement and the upside price target for this pattern would be around the previously-broken very short-term declining support/resistance line (marked with green). This scenario is also reinforced by the position of the indicators, which generated buy signals.
Nevertheless, we should keep in mind that the pair erased only 38.2% of the recent decline and both breakouts are not confirmed at the moment. From this point of view, it seems justified to wait for an invalidation of the breakdown before opening long positions.
Very short-term outlook: mixed
Short-term outlook: bearish
MT outlook: bearish
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.
AUD/USD
In our last Forex Trading Alert we wrote the following:
(…) recent days have formed a consolidation. According to theory, if AUD/USD climbs above Friday’s high, we will likely see further improvement. Additionally, the CCI and Stochastic Oscillator generated buy signals, which is a bullish signal.(…) even if we see such price action, a strong resistance zone created by December lows and Wednesday high will likely stop further growth. Please note that it is still too early to say that the worst is behind the holders of the Australian currency as the pair remains below this resistance zone and another downswing can’t be rule out.
On the above chart, we see that the situation has improved slightly as AUD/USD extended gains and reached its first upside target. Nevertheless, all the above remains up-to-date also today. At this point, you may ask an important question: when we can talk about a significant improvement? In our opinion, the first signal of an improvement will be an increase above the very short-term blue rising resistance line and a breakout above the short-term declining resistance line based on the Oct.23 and Jan.13 highs (marked with dark blue).
Very short-term outlook: mixed
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish
Trading position (short-term): we do not suggest opening any positions at the moment. 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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