Although the University of Michigan showed that its index of consumer sentiment slipped to 91.9 this month from 92.9 in July, positive data from the U.S. Bureau of Economic Analysis (which showed that the goods trade deficit narrowed to $59.12 billion in the previous month) in combination with rising U.S. personal spending and U.S. personal income supported the greenback. Thanks to these circumstances, the USD Index climbed above the level of 96. What impact did this increase have on our six currency pairs?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (a stop-loss order at 1.1445; the downside target around 1.0938)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Looking at the weekly chart we see that EUR/USD extended losses under the red line and the previously-broken orange resistance zone, which suggests lower values of the exchange rate in the coming days.
What impact did this decline have on the very short-term picture? Let’s check.
Quoting our previous commentary:
(…) the next downside target would be (…) the previously-broken upper line of the rising trend channel or we may see a decline even to around 1.1030, where the size of the downward move will correspond to the height of the formation and where the mid-Aug lows are.
From today’s point of view we see that currency bears pushed EUR/USD below the above target earlier today, which means that our next downside target would be in play in the coming days.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed with bearish bias
LT outlook: mixed
Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1445 are justified from the risk/reward perspective. The downside target around 1.0938. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
In our last commentary on this currency pair, we wrote the following:
(…) GBP/USD invalidated earlier breakout above the upper border of the consolidation, which suggests that further declines are just around the corner.
As you see on the chart, the situation developed in line with the above scenario and the exchange rate moved sharply lower, breaking under the lower border of the rising trend channel. This is a negative signal, which suggests further deterioration.
Will the very short-term picture confirm the above? Let’s check.
Looking at the daily chart we see that GBP/USD moved sharply lower and dropped below both green support lines, which triggered further deterioration and a decline to the Jul low. If this support withstands the selling pressure, we’ll see a rebound from here. Nevertheless, taking into account the medium-term picture and the current position of the daily indicators, it seems that currency bears will try to push the pair lower in the coming days. If this is the case, and we see a breakdown, the next downside target would be around 1.5247, where the 50% Fibonacci retracement is.
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/JPY
The medium-term picture has deteriorated as USD/JPY extended losses and declined under the lower border of the rising trend channel. Nevertheless, despite this deterioration, the exchange rate rebounded and invalidated earlier breakdown, which is a positive sign.
What impact did this price action have on the very short-term picture? Let’s check.
From today’s point of view we see that USD/JPY broke below the blue and green support lines, which triggered a sharp decline that took the pair to the levels seen in Jan. Despite this deterioration, the exchange rate rebounded and climbed to the previously-broken lines. What’s next? Taking into account the medium-term picture and buy signals generated by the daily indicators, we think that further improvement is just around the corner. However, this scenario would be more reliable if we see a comeback above the key resistance lines in the coming day(s).
Very short-term outlook: mixed with bullish 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/CAD
The medium-term picture hasn’t changed much as USD/CAD is trading above the 2008 high. Today, we’ll focus on the very short-term changes.
Looking at the daily chart, we see that although USD/CAD moved higher once again, the green resistance line continues to keep gains in check. Taking this fact into account, and combining it with sell signals generated by the indicators, we think that further deterioration is just around the corner. If this is the case, and the pair moves lower from here, the initial downside target would be around 1.2950-1.3015, where the bottom of the previous pullback and the 23.6% Fibonacci retracement (based on the entire May-Aug rally) are. Nevertheless, this bearish scenario will be more likely if we see a daily closure under the lower border of the blue consolidation (below 1.3142).
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
Quoting our Wednesday’s alert:
(…) an upward move that invalidated earlier breakdown under the upper green zone. Taking this positive factor into account and the current position of the indicators (they all generated buy signals), it seems that higher values of the exchange rate are ahead us. If this is the case and the pair extends gains the initial upside target would be around yesterday’s high, where the 38.2% Fibonacci retracement (based on the entire recent decline) is. If it is broken, we may see a rally to around 0.9577, where the next Fibonacci retracement is.
Looking at the charts, we see that currency bulls managed to push USD/CHF above our upside targets, which resulted in a rally to the 61.8% Fibonacci retracement. Earlier today, this resistance level triggered a pullback, however, buy signals remain in place, suggesting another attempt to move higher. If the exchange tare breaks above yesterday’s high, the next upside target would be around 0.9713,where the 70.7% retracement is.
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed with bullish bias
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 AUD/USD is trading in the green support zone (based on the 76.4% and 78.6% Fibonacci retracement levels). Today, we’ll focus on the daily chart.
From today’s point of view we see that AUD/USD remains in the consolidation (marked with blue) between the upper and lower border of the declining wedge (marked with orange). Taking this fact into account, we think that as long as there is no daily closure above/below one of these lines a sizable upward/downward move is not likely to be seen. Nevertheless, the current position of the indicators suggests that we’ll likely see another test of the upper border of the formation in the coming days.
Very short-term outlook: mixed
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
