Earlier today, the Office for National Statistics showed that manufacturing output fell 0.4% in October, missing forecasts for a decline of 0.1%. Thanks to these disappointing numbers, GBP/USD extended losses and declined below the barrier of 1.5000. Will we see a test of the recent lows in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Quoting our previous commentary:
(…) EUR/USD declined to our initial downside target. If this area withstands the selling pressure, we’ll see a rebound to around 1.0865, where the 38.2% Fibonacci retracement (based on the recent decline) is.
Looking at the daily chart we see that currency bulls not only took EUR/USD to our initial upside target, but also managed to push the pair higher, which suggests further improvement and an increase to around 1.0936-1.0940, where the resistance area created by the 76.4% and 78.6% Fibonacci retracement is. If it is broken, we may see a test of the last week’s high.
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
From today’s point of view we see that the proximity to the green dashed resistance line encouraged currency bears to act, which resulted in an invalidation of earlier comeback above the green zone. This negative event triggered further deterioration, which in combination with sell signals generated by the indicators suggests a re-test of 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) 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.
AUD/USD
Quoting our Friday’s alert:
(…) currency bulls pushed the pair to the upper border of the brown rising trend channel as we had expected. Despite this improvement, the proximity to the mid-Oct high in combination with the resistance line triggered a pullback earlier today. Taking this fact into account and the current position of the indicators (they are very close to generating sell signals), we think that further deterioration is just around the corner. Nevertheless, such price action will be more likely if we see an invalidation of the breakout above the orange zone.
Looking at the daily chart we see that the situation developed in line with the above scenario and AUD/USD invalidated the breakout above the orange zone. This bearish event triggered a sharp decline, which took the pair below the lower border of the brown rising trend channel. With this downward move, the exchange rate reached the green line based on the previous lows. Although this support could pause further deterioration, the current position of the indicators suggests lower values of AUD/USD 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
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