Although the U.S. Commerce Department showed that housing starts increased by 6.5% in Sept (to 1.206 million units, beating analysts‘expectations), the number of building permits issued dropped by 5.0%. Thanks to these mixed numbers, the USD Index erased some of earlier losses, while EUR/USD verified the breakdown under the support/resistance line once again. Will we see further deterioration in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.1887; the downside target around 1.0938)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

The medium-term picture remains almost unchanged as EUR/USD is trading slightly below the long-term red declining resistance line. Today, we’ll focus on the very short-term changes.

Earlier today, EUR/USD moved higher and tested the upper border of the rising trend channel (marked with green dashed line). Despite this increase, we think that as long as there is no daily close above this resistance line, another attempt to move lower is more likely than not. Therefore, if EUR/USD declines from here, the initial downside target would be the blue support line.

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 1.1887 are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

GBP/USD

From this perspective, we see that although GBP/USD invalidated small breakout above the red resistance line (based on the Aug 25 and Sept 18 highs), the pair rebounded and came back above it. Despite this improvement, the pair is consolidating under the last week’s high, which means that as long as here is no breakout above the upper line of the formation, further rally is questionable.

Will the medium-term chart give us more clues about future moves? Let’s check.

The situation in the medium term has improved as GBP/USD extended gains and approached the upper border of the red declining trend channel, which suggests that the space for further rally might be limited.

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/CAD

As you see on the daily chart, currency bulls managed to invalidate the breakdown under the green zone, which suggests an increase to around 1.3078, where the last Tuesday high is (especially when we factor in buy signals generated by the indicators).

But are there any technical factors that could hinder the realization of the above scenario? Let’s examine the weekly chart and find out.

From today’s point of view we see that USD/CAD rebounded after a drop to the green support zone and approached the previously-broken support/resistance level based on the 2009 high. Taking this fact into account, we think that further improvement will be more likely and reliable only if we see a comeback above is. Until this time, another downswing can’t be ruled out.

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

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