Disappointing Friday’s data took the USD Index below 97, extending Thursday’s decline. As a result, USD/CHF declined to its key support line. Will it withstand the selling pressure in the coming week?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
The situation in the medium term hasn’t changed much as EUR/USD still remains above the long-term green support line and the lower border of the long-term declining trend channel, which together keep declines in check.
Having said that, let’s take a closer look at the very short-term picture.
From this perspective, we see that EUR/USD is still trading under the 50-day moving average. Therefore, what we wrote on Friday is up-to-date:
(…) the exchange rate rebounded and climbed above 1.0800, reaching the 50-day moving average. At this point it is worth noting that at the beginning of the month, this resistance was strong enough to stop further improvement and trigger a deep pullback. Taking this fact into account, and combining it with the proximity to the orange resistance line, it seems that we could see similar price action in the coming days. If this is the case, the pair will reverse and test the long-term support line once again.
(…) please note that even if EUR/USD breaks above the above-mentioned lines, the exchange rate will be still trading under the resistance zone created by the Mar and Apr highs. Therefore, in our opinion, a sizable upward move will be more likely only if we see a breakout above this area.
Very short-term outlook: mixed with bearish bias
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
Looking at the weekly chart, we see that GBP/USD invalidated a small breakout above the upper line of the consolidation (marked with blue), which suggests that a pullback from here in the coming week should not surprise us.
Are there any short-term factors that could support currency bears? Let’s examine the daily chart and find out.
On Friday, we wrote the following:
(…) today’s move took the exhange rate to the resistance zone created by the 23.6% Fibonacci retracement (based on the entire Jul-Apr orrection), 61.8% retracement (based on the Feb-Apr declines), the Mar 18 high and the upper line of the consolidation marked on the weekly chart, which could pause or even stop further rally.
As you see on the daily chart, the above-mentioned resistance zone triggered a small pullback earlier today, which suggests a test of the previously-brokenlong-term support line in the coming day(s) – especially when we factor in the current position of the indicators (the CCI and Stochastic Oscillator are very close to generate sell signals). Please note that if currency bears manage to push the exchange rate below it, we might see a decline even to the green support zone (around 1.4980-1.5008) in the near future.
Very short-term outlook: mixed with bearish bias
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.
USD/CHF
On the above charts we see that USD/CHF bounced off the long-term red support line once again. Therefore, our last commentary on this currency pair is still valid:
(…) this solid support has stopped declines in the previous weeks, which suggests that we’ll likely see similar price action in the coming days. If this is the case, the initial upside target would be around 0.9715, where this week’s highs are.
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
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
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