Earlier today, EUR/USD moved lower against the greenback, which pushed the pair not only below 1.1200, but also under the lower border of the consolidation. What does it mean for the exchange rate?

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

• EUR/USD: short (stop-loss order at 1.1512; initial downside target at 1.0572)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: long (stop-loss order at 0.9542; initial upside target at 0.9985)
• AUD/USD: none

EUR/USD

Looking at the daily chart, we see that although EUR/USD moved little higher yesterday, the exchange rate reversed and dropped under the lower border of the blue consolidation once again, which means that what we wrote in our previous alert on this currency pair is up-to-date:

(…) the key resistance zone (marked with orange and reinforced by the red resistance line based on the Apr and Jul lows) continues to keep gains in check. Therefore, we believe that as long as there will be no breakout above this area lower values of the exchange rate are very likely.

(…) EUR/USD declined not only under the lower border of the blue rising wedge, but also below the lower line of the blue consolidation, which suggests further deterioration and a drop to around 1.1071, where the size of the move will correspond to the height of the formation. In this area is also the lower border of the green rising trend channel and the green horizontal support line, which together could pause further declines.

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 1.1512 and the initial downside target at 1.0572) 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

Quoting our previous commentary on this currency pair:

(…) USD/JPY (…) reached the support line based on the Aug 2008 high and approached the 61.8% Fibonacci retracement (based on the Feb 2014-May 2015 upward move). Additionally, daily and weekly indicators are oversold (and very close to generating buy signals), which suggests that the space for declines may be limited and reversal in the coming week should not surprise us.

As you see on the charts, the situation developed in line with the above scenario and USD/JPY bounced off recent lows. Taking into account buy signals generated by the indicators, we think that the exchange rate will climb to at least the green and red resistance lines (around 113.33-114.05 at the moment) in the coming days.

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

Looking at the above charts, we see that the overall situation hasn’t changed much as AUD/USD is trading in a narrow range between the upper border of the purple rising trend channel and the 61.8% Fibonacci retracement (based on the May-Feb decline) (marked on the weekly chart). Therefore, our last commentary on this currency pair is up-to-date:

(…) although the 61.8% retracement triggered a small pullback, the previously-broken upper border of the purple rising trend channel stopped currency bears. As a result, AUD/USD moved higher earlier today, which suggests a test of the recent high. If it is broken, we may see an increase even to 0.7769, where the 70.7% Fibonacci retracement is. Nevertheless, the current position of the daily (all indicators generated sell signals) and weekly indicators suggests that the space for rally may be limited and reversal in the coming week should not surprise us.

Finishing today’s commentary on AUD/USD please note that if the exchange rate drops under the green support line based on the March 1 and March 16 lows, we’ll consider opening short positions.

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. 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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