Earlier today, official data showed that the Markit U.K. construction purchasing managers' index declined to 55.0 in the previous month, missing expectations for a drop to 57.5. Thanks to these numbers, GBP/USD gave up some gains and moved away from the first resistance line. Will we see further deterioration in the coming days?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (stop-loss order at 1.1363; initial downside target at 1.0462)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: long (stop-loss order at 1.3792; initial upside target at 1.4512)
- USD/CHF: none
- AUD/USD: none
EUR/USD
On the above chart, we see that although EUR/USD moved higher earlier this week, the upper long-term resistance line (which stopped currency bulls in Aug and Oct) continues to keep gains in check.
What can we infer from the very short-term chart? Let’s check.
As you see on the daily chart, the green support zone triggered a rebound, which suggests that we may see another test of the red declining resistance line based on the recent highs in the coming day. Nevertheless, as long as the pair remains under this resistance and the 38.2% Fibonacci retracement another sizable increase is not likely to be seen.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: mixed
Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.1363 and the initial downside target at 1.0462) 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
Looking at the long-term chart, we see that the pair invalidated the breakdown under the 2010 low which is a positive signal that suggests further improvement. But will we see such price action? Let’s examine the daily chart and find out whether there are any very short-term factors which could hinder the realization of this scenario or not.
From this perspective, we see that GBP/USD reversed and rebounded sharply yesterday, which took the pair to the upper border of the very short-term purple rising trend channel. As you see, this resistance triggered a pullback earlier today, which suggests that we may see a test of the lower line of the formation in the coming days (especially if indicators generate sell signals).
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
On the long-term chart, we see that the recent upward move took USD/JPY to the orange resistance line, which stopped further improvement and triggered a pullback. How did this drop affect the very short-term picture? Let’s check.
On Friday, we wrote the following:
(…) USD/JPY shoot up and reached the 70.7% Fibonacci retracement earlier today. Although this is a positive signal, the current position of the indicators suggests that a correction of the recent rally is just around the corner.
Looking at the above chart, we see that the situation developed in line with the above scenario and the exchange rate gave up some gains. Taking this fact into account, and combining it with the long-term picture and the current position of the indicators (the CCI and Stochastic Oscillator are very close to generating sell signals), it seems that further deterioration is just around the corner. If this is the case, and the exchange rate extends losses, we may see a test of the purple rising support line in the coming days.
Very short-term outlook: mixed with bearish 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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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