Earlier today, the Westpac Banking Corporation showed that Australia's consumer sentiment rose 1.9% in November, while another report said that Australian wage prices increased by 0.6% in the third quarter. Thanks to these solid numbers AUD/USD moved sharply higher, invalidating breakdown below the support/resistance line. Will this bullish signal trigger a rally in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
The medium-term picture of EUR/USD hasn’t changed much as the exchange rate is still trading around the 127.2% Fibonacci extension. Will the daily chart show us where will the pair head next?
Quoting our Monday’s Forex Trading Alert:
(…) the resistance created by the previous lows stopped further rally earlier today. Taking this fact into account, it seems that the pair will erase the recent upward move and we’ll see a test of the support area around 1.2400 in the coming days.
Looking at the daily chart, we see that the situation developed in line with the above-mentioned scenario as the pair slipped below 1.2400 yesterday. Despite this drop, the breakdown was invalidated almost immediately, which triggered a sharp increase to the barrier of 1.2500 in the following hours. As you see, this solid resistance stopped the rally and EUR/USD reversed and declined earlier today – similarly to what we saw on Monday. In this way, the exchange rate is still trading in a consolidation (marked with blue), which means that as long as there is no breakout above the upper line of the formation (and an invalidation of the breakdown below 1.2500), another upward move is not likely to be seen.
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
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.
GBP/USD
Looking at the above charts, we see that although GBP/USD invalidated the breakdown below the previous lows, the proximity to the red and blue declining resistance lines (marked on the daily chart) was enough to trigger a downswing earlier today. As a result, the exchange rate reversed and declined under the green line, which suggests that we’ll see further deterioration and the next downside target would be around 1.5705-1.5730, where the support zone create by the 61.8% Fibonacci retracement and the lower border of the declining wedge (marked with blue on the daily chart) are.
Very short-term outlook: mixed with bearish bias
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
AUD/USD
Quoting our last commentary on this currency pair:
(…) although AUD/USD moved little lower earlier today, breaking below the recent low and the 112.8% Fibonacci extension, the exchange rate rebounded sharply and invalidated this breakdown almost immedately. This is a bullish signal (especially when we factor in a strong support level created by the 50% Fibonacci retracement based on the entire 2008-2011 rally), which could trigger a bigger corrective move in the coming week. If this is the case, the initial upside target would be around 0.8641-0.8650, where the previous lows are.
On the daily chart, we clearly see that currency bulls not only pushed the exchange rate above the previous lows, but also invalidated the breakdown under the green support/resistance line. This is a strong bullish signal, which suggests further improvement and an increase to the 38.2% Fibonacci retracement (around 0.8909) in the coming days. Please note that buy signals generated by the indicators remain in place, supporting the bullish case.
Very short-term outlook: bullish
Short-term outlook: mixed with bullish bias
MT outlook: mixed
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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