Earlier today, the ADP report that U.S. non-farm private employment increased by 217,000 in the previous month, beating expectations for an increase of 190,000, which added to speculation that the Fed will raise interest rates at its December meeting. Thanks to these numbers, the USD Index came back above the barrier of 100. How did this increase affect the technical picture of the euro, British pound and Swiss franc?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
On the daily chart, we see that although EUR/USD extended gains earlier today, the upper border of the blue declining trend channel stopped further improvement, triggering a pullback. This means that what we wrote yesterday remains up-to-date:
(…) the pair remains in the blue declining trend channel, which means that as long as there is no breakout above the upper border of the formation sizable upward move is not likely to be seen and another test of the 127.2% Fibonacci extension 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.
GBP/USD
Looking at the daily chart, we see that GBP/USD moved higher and verified earlier breakdown under the green zone and the brown dashed support/resistance line yesterday. This negative signal encouraged currency bears to act, which resulted in a pullback earlier today. Taking the above into account, we believe that our previous commentary on this currency pair is still valid:
(…) we think that the pair will test the 70.7% Fibonacci retracement in the coming days. However, at this point, it s worth noting that even if the exchange rate moves lower, the space for further declines seems limited as the lower border of the red declining trend channel (marked on the weekly chart) and the brown support line based on the previous lows (marked on the daily chart) are quite close the current levels.
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
As you see on the chart, although USD/CHF moved lower and slipped under the previously-broken blue line (marked on the daily chart), the pair is still trading in the red rising trend channel above the orange zone (marked on the weekly chart). Therefore, we think that as long as there is no breakdown under the lower red line (which currently intersects the lower border of the blue consolidation) and an invalidation of the breakout above the orange zone a sizable downward move is not likely to be seen. Nevertheless, please keep in mind sell signals generated by the daily indicators, which could encourage currency bears to act in the coming day(s) – especially when we factor in the current position of the weekly indicators (they are overbought and very close to generating sell signals). In other words, a reversal in the coming days should not surprise us. If this is the case, and the exchange rate drops under 1.0224 (the lower border of the blue consolidation), the initial downside target would be around 1.0127, where the previously-broken March high is. If this support is broken, the next target for currency bears would be around 0.9988, where the bottom of the mid-Nov pullback is.
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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