Earlier today, the Australian dollar moved lower against its U.S. counterpart as yesterday’s upbeat U.S. housing starts data continued to support the greenback. As a result, AUD/USD declined to important support. Will we see a rebound from here?

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 re-tested the upper border of the rising trend channel (marked with green dashed line) – similarly to what we saw yesterday. Therefore, our last commentary is still valid:

(…) 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.

USD/JPY

The situation in the medium-term hasn’t changed much since our last commentary was posted as the exchange rate is still trading in the consolidation under the blue resistance line.

Will the very short-term chart give us any clues about future moves? Let’s check.

Quoting our Friday’s alert:

(…) USD/JPY rebounded and invalidated earlier breakdown under the green zone. (…) Taking this positive signal into account and combining it with the current position of the indicators, we think that further improvement is more likely than not. If this is the case, and USD/JPY moves higher from here, the initial upside target would be around 119.95, where the previously-broken green line is.

Looking at the daily chart, we see that the situation developed in line with the above scenario and USD/JPY approached our initial upside target earlier today. Although the pair could pull back from here, the current position of the indicators (buy signals remain in place) suggests that currency bulls will try to push the air higher in the coming day(s). Nevertheless, even if they succeed, we think that further improvement will be more likely (and reliable) only if we see a confirmed breakout above the brown declining resistance line (currently around 120.23). Until this time, another downswing can’t be ruled out.

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.

AUD/USD

On Friday, we wrote the following:

(…) AUD/USD approached the orange resistance line (marked on the weekly chart) and the orange resistance zone, which triggered another decline. Taking this fact into account, and combining it with the current position of the daily indicators, we think that a test of the Wednesday’s low (and the lower border of the blue consolidation) in the coming days is more likely than not.

As you see on the daily chart, currency bears pushed the pair lower (as we had expected) and AUD/USD approached our initial downside target. What’s next? Although the exchange rate could rebound from this support area, the current position of the indicators suggests further deterioration. If this is the case and the pair breaks below 0.7197, the next downside target for currency bears would be around 0.7145, where the 50% Fibonacci retracement (based on he Sept-Oct rally) 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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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