Yesterday’s solid data continued to support the greenback also today, which resulted in a comeback above the level of 95.50. Will U.S. consumer sentiment data support further improvement later in the day? Before we know the answer to this question, let’s examine the current picture of our six currency pairs and find out what can we infer from the charts.

In our opinion the following forex trading positions are justified - summary:

• EUR/USD: Short positions (stop-loss order at 1.1667)
• GBP/USD: Short positions (stop-loss order at 1.5913)
• USD/JPY: none
• USD/CAD: Long positions (stop-loss order at 1.1706)
• USD/CHF: none
• AUD/USD: Short positions (stop-loss order at 0.8194)

EUR/USD

Yesterday, EUR/USD moved lower, which means that what we wrote in our last commentary is up-to-date:

(…) EUR/USD reached the long-term red declining line. As you see on the above chart, this resistance line stopped further improvement and triggered a pullback, which took the exchange rate below the 23.6% Fibonacci retracement. This is a negative signal, which suggests further declines.

How did this downswing affect the very short-term picture? Let’s examine the daily chart and find out.

Quoting our yesterday’s alert:

(…) the exchange rate moved away from the orange resistance zone, which in combination with the medium-term picture and the current position of the indicators (the CCI generated a sell signal, while the Stochastic Oscillator is very close to doing the same) suggests further declines.

From today’s point of view we see that although EUR/USD rebounded slightly, the pair closes the day under the orange resistance zone, which is a bearish signal that suggests further declines. If this is the case, and the pair drops from here, the initial downside target would be around 1.1144, where the green rising support line currently is.

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions (which are profitable) with a stop-loss order at 1.1667 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

On Wednesday, we wrote the following:

(…) although GBP/USD moved sharply higher, the pair remains under the red resistance line based on the previous highs. Additionally, sell signals generated by the indicators are still in play, suggesting that reversal is just around the corner.

As you see on the weekly chart, the situation developed in line with the above scenario and GBP/USD declined slightly.

What impact did this move have on the very short-term chart? Let’s check.

On the daily chart, we see that GBP/USD broke above the 50% Fibonacci retracement, but despite this improvement currency bulls didn’t manage to push the pair to the next retracement, which triggered a decline. Although the exchange rate rebounded and closed yesterday’s session above this level, the current position of the indicators suggests that another pullback is just around the corner. If this is the case, and GBP/USD closes today’s session under the 50% retracement it would be a bearish signal, which will trigger further deterioration and a drop to around 1.5367, where the Wednesday’s low is.

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions (which are profitable) with a stop-loss order at 1.5913 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/JPY

Earlier this week, USD/JPY invalidated the breakout above the June 2007 high, but the pair is trading very close to this resistance, which could translate to another upswing in the coming week.

Will we see such price action? Let’s focus on the daily chart and look for more clues about future moves.

Looking at the daily chart, we see that although USD/JPY came back to the orange resistance zone, currency bulls didn’t manage to hold gained levels and the pair slipped under the orange area. Despite this fail, the exchange rate moved higher earlier today, which in combination with the current position of the indicators suggests higher values of USD/JPY in the coming days. Nevertheless, we should keep in mind that further improvement will be more reliable if we see a daily close above this zone. In this case, the next level to break will be the previously-broken red dashed line, which serves now as resistance.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bullish

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/CAD

Looking at the weekly chart, we see that USD/CAD dropped below the blue support/resistance line, which triggered a decline. With this downswing, the pair approached the long-term green support line, which resulted in a rebound.

Will we see further improvement in the coming week? Let’s examine the daily chart and find out what can we infer from it.

From this perspective, we see that USD/CAD slipped to the area, where the size of the downswing corresponded to the height of the blue consolidation, which decreased the selling pressure and triggered a rebound. Yesterday, currency bulls didn’t manage to invalidate earlier breakdown under the orange resistance zone, but taking into account the current position of the indicators (the Stochastic Oscillator generated a buy signal, while the CCI is very close o doing the same), it seems to us that we’ll see another attempt to move higher in the coming days. Nevertheless, further rally will be more likely if USD/CAD closes the day above the orange resistance area.

Very short-term outlook: bullish
Short-term outlook: mixed with bullish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Long positions (which are profitable) with a stop-loss order at 1.1706 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

Quoting our previous alert:

(…) USD/CHF broke above the upper line of the declining trend channel and the upper border of the triangle, which is a positive signal that suggests further improvement. Nevertheless, we think that this event will be more bullish (and more reliable) if we see a daily close above these lines. Until this time, another pullback from here should not surprise us.

As you see on the daily chart, currency bulls didn’t manage to hold gained levels and USD/CHF slipped under the previously-broken lines. Despite this drop, they didn’t give up and tried to push the pair higher earlier today. If we see a daily close above both resistance lines, it would be a bullish signal, which will likely accelerate further improvement in the coming day(s). Finishing today’s commentary on this currency pair, we would like to draw your attention to the fact that the CCI and Stochastic Oscillator generated buy signals, supporting the bullish case.

Will we see further rally in the coming days? Let’s check the weekly chart and find out.

Looking at the weekly chart, we see that although USD/CHF invalidated earlier breakdown below the long-term green support line, the pair remains under the upper border of the brown declining trend channel. Therefore, in our opinion, as long as there is no breakout above this important resistance line further rally 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; 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 proximity to the last weeks high encouraged currency bears to act, which resulted in a pullback. This suggests that we might see another test of the green support line (based on the previous lows) in the coming week.

How did this drop affect the very short-term picture? Let’s check the daily chart and find out.

On Wednesday, we wrote the following:

(…) currency bulls didn’t manage to hold gained levels, which translated to a sharp pullback. Taking this fact into account, we think that as long as there is no successful breakout above this area another move to the downside is likely.

From today’s point of view we see that the situation developed in tune with the above scenario as the orange resistance zone stopped further improvement once again. Earlier today, the exchange rate moved sharply lower, which suggests a test of the green support line (based on the recent lows) or even the recent lows in the coming week.

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions (which are profitable) with a stop-loss order at 0.8194 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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