Earlier today, the U.S. currency moved higher after the Commerce Department showed stronger-than-expected data on U.S. durable goods orders, which rose 2.2% last month (above expectations for a 1% increase). Meanwhile, core durable goods orders (without transportation items) moved up 0.2%, slightly below forecasts for a 0.3% gain. What impact did it have on major currency pairs? What is their current outlook? If you want to know our take on this question, we invite you to read our today's Forex Trading Alert.
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Yesterday, EUR/USD rebounded sharply after a drop to the 50-day moving average, but the short-term resistance line stopped further improvement and the exchange rate reversed. Earlier today, the pair declined and approached the 50-day moving average once again. Taking into account a price action that we saw in the previous days, if EUR/USD drops to this line, we may see another corrective upswing in the following hours. However, if the exchange rate extends losses and broke below this support, we will likely see a drop to the 50% Fibonacci retracement.
Very short-term outlook: mixed with bearish bias
Short-term outlook: bearish
MT outlook: mixed
LT outlook: bearish
Trading position (our opinion): If the exchange rate declines below the Thursday’s low (1.3748), we will consider to re-enter short position. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
On the daily chart, we see that the situation has improved as GBP/USD broke above the green support/resistance line based on recent lows. With this upswing, the pair also climbed above the medium-term rising support/resistance line based on the July and February lows. As you see on the above chart, this improvement was only temporarily and the exchange rate reversed, slipping below this important line. However, looking at the current position of the indicators, we see that they suggest that further improvement is just around the corner (buy signals remain in place). Will the 4-hour chart give us any interesting clues about future moves? Let’s take a look.
From this perspective, we see that the exchange rate broke temporarily above the red declining resistance line (which currently reinforces the medium-term rising support/resistance line) and reached the 38.2% Fibonacci retracement level. If this resistance level is broken, we will likely see further improvement and the first upside target will be the next Fibonacci retracement level (around 1.6624). However, if the buyers fail and the pair declines, we may see an invalidation of the breakout above the red resistance line and a drop to around 1.6508 (where today’s low is).
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment. However, if the pair climbs above the resistance zone, we consider opening long positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
On the above chart, we see that the situation has deteriorated as USD/JPY extended declines below the red declining resistance line (which successfully stopped further improvement in the recent days). With this downswing, the pair dropped below the Friday low, which suggests that we may see further deterioration and the first downside target for the sellers will be around 101.85 (where the previously-broken upper line of the consolidation is).
Before we summarize this currency pair, let’s take a look at the 4-hour chart.
From this perspective, we see can see a bearish head and shoulders formation. Earlier today, USD/JPY broke below the neck level and declined to the March 18 high, which serves as support at the moment. However if it is broken, we will likely see a drop to the green support line, which is currently slightly below the downside price target (marked with an orange rectangle). The current position of the indicators support this bearish scenario as sell signals remain in place.
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): In 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.
USD/CAD
Quoting our last Forex Trading Alert:
(…) USD/CAD extended losses and dropped to the Friday low earlier today. (…) looking at the current position of the indicators (they all generated sell signals), it seems that a bearish scenario is more likely to be seen. Please note that if the exchange rate drops below the March 19 low, we will likely see a pullback to the lower border of the rising trend channel in the coming day (or days).
As you see on the above chart, we noticed such price action earlier today as the exchange rate almost touched the lower border of the rising trend channel. On one hand, if this strong support encourages buyers to act, we may see a corrective upswing in the near future. However, if it is broken, we will likely see further deterioration and the first downside target will be the 23.6% Fibonacci retracement (around 1.1146), which corresponds to the March 18 low.
Very short-term outlook: mixed with bearish bias
Short-term outlook: bullish
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): In our opinion, the situation is not bearish enough to go short, so opening positions at the moment is not a good idea from the risk/reward perspective. 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 as USD/CHF remains in a consolidation between the upper line of the declining wedge/trend channel (marked with brown) and the 38.2% Fibonacci retracement level, which successfully stopped further improvement in the previous days. On one hand, if the buyers do not give up and break above the 38.2% Fibonacci retracement, we may see an increase to around 0.8890 (where the top of a bearish candlesticks pattern is) or even to the next Fibonacci retracement. However, if they fail and we see an invalidation of a breakout in the coming day (or days), the exchange rate will likely drop to the Monday’s low. Please note that this bearish scenario is currently reinforced by the position of the indicators, which suggests that a pullback is just around the corner.
Very short-term outlook: mixed
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish
Trading position (short-term): In our opinion, the situation is not enough bullish to go long at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
AUD/USD
Looking at the above chart, we see that AUD/USD extended gains and hit a fresh 2014 high. With this upward move, the buyers pushed the exchange rate above a resistance zone between 0.9151 and 0.9165, which was a strong bullish signal. As you see on the daily chart, the pair also broke above the 50% Fibonacci retracement and the upper line of the rising trend channel. According to theory, such price action may trigger further improvement and if this is the case, the upside target would be around 0.9407. From this perspective, we can also see a bullish reverse head and shoulders pattern (the neck level marked with red). In this case, the upside price target for the buyers is around 0.9508. Despite these positive circumstances, we should keep in mind that the indicators are overbought, which suggests that a pause should not surprise us.
Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: bearish
LT outlook: bearish
Trading position (short-term; our opinion): In 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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
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