Although the U.S. Commerce Department showed that U.S. consumer prices dropped 0.7% in the previous month (missing expectations for a decline of 0.6%), the data also showed that durable goods orders increased by 2.8% (above expectations for a 1.7% gain), core durable goods orders without volatile transportation items moved up 0.3% and core consumer prices without food and energy costs increased by 0.2% in January. Thanks to these positive numbers, the USD Index moved higher and increased above 95, erasing the recent losses. As a result, AUD/USD moved sharply lower, invalidating earlier breakout. What does it mean for the exchange rate?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: none
- USD/JPY: none
- USD/CAD: short (stop loss order at 1.2876)
- USD/CHF: none
- AUD/USD: none
EUR/USD
The situation in the medium term has deteriorated as EUR/USD reversed and declined to the 61.8% Fibonacci retracement (based on the entire 2000-2008 rally). If this important support is broken, we’ll likely see a test of the strength of the Jan low and the 100% Fibonacci price projection.
How did this drop influence the daily chart? Let’s find out.
The first thing that catches the eye on the above chart is a breakdown under the support zone created by the Feb lows. Additionally, EUR/USD dropped well below the lower border of the consolidation (marked with green). In our opinion these are bearish signals, which in combination with the medium-term picture suggest lower values of the exchange rate. Taking this fact into account, we think that closing long positions is justified from the risk/reward perspective as the pair could hit a double bottom in the coming days.
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; 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
The medium-term picture hasn’t changed much as GBP/USD still remains above the previously-broken upper border of the consolidation and the long-term green support line, which serve as the major support at the moment. Today, we’ll take a closer look at the very short-term changes.
On the daily chart, we see that the situation in the very short-term has deteriorated as the exchange moved sharply lower after an approach the upper line of the rising trend channel. With this downswing, GBP/USD dropped under yesterday’s low, which in combination with the current position of the indicators (they all generated sell signals) suggests further deterioration and a decline to the lower border of the trend channel (currently around 1.5372) in the coming day(s).
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; 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
The situation in the medium term hasn’t changed much as an invalidation of the breakdown below the Jul 2009 lows and its potential positive impact on future moves is still in effect.
Having said that, let’s take a closer look at the daily chart.
From this perspectve, we see that although the pair moved higher earlier today, the upper border of the consolidation (marked with blue) stopped further rally. Taking this fact into account, and combining it with the position of the indicators (the CCI and Stochastic Oscillator are very close to generate sell signals), it seems to us that the next move will be to the downside. If this is the case, the initial target for currency bears would be around 0.7718-0.7738 where the Feb 24 and the lower line of the consolidation are.
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; 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
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
