Earlier today, the U.K. Office for National Statistics reported that retail sales declined by 0.9% in June, while core retail sales (without automobiles) dropped by 0.9%, missing analysts’ forecasts and increasing worries over strength of the British economy. In this environment, GBP/USD slipped under 1.3200. What happened at the same time with our other currency pairs?

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

• EUR/USD: short (a stop-loss at 1.1236; initial downside target at 1.0708)
• GBP/USD: short (a stop-loss at 1.3579; initial downside target at 1.2519)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the medium-term chart, we see that the situation hasn’t changed much, which means that what we wrote yesterday remains up-to-date:

(…) EUR/USD is still trading in a narrow range between the green support zone (created by the late Feb and early Mar lows and reinforced by the 70.7% Fibonacci retracement) and the previously-broken brown rising resistance line. Taking this fact into account, we think that another bigger move will be more likely if we see a breakdown under the green zone or invalidation of the breakdown under the brown line. Until this time short-lived moves in both directions should not surprise us.

Nevertheless, the long-term picture below suggests that further declines are just a matter of time. Why?

Because sell signals generated by the indicators remain in place, supporting further deterioration and a re-test of the strength of the long-term green support line (currently around 1.0708) in the coming week(s).

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 1.1236 and initial downside target at 1.0708 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

On the weekly chart, we see that although GBP/USD moved sharply higher and increased above the previously-broken lower border of the red declining trend channel in the previous week, currency bulls didn’t manage to hold gained levels, which resulted in a drop below this important line. Earlier this week, they tried to push the exchange rate higher once again, but it seems (at least at the moment of writing these words) that they will fail once again. If this is the case and the pair closes this week under the lower border of the red declining trend channel, it would be a verification of earlier breakdown, which will likely trigger further deterioration and lower values of the exchange rate in the coming week. At this point it is also worth noting that despite this week’s move, the pair is still trading under the neck line of the head and shoulders formation, which means that the long- and medium-term outlooks remain bearish.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish

Trading position (short-term; our opinion): Short positions with a stop-loss at 1.3579 and the initial downside target at 1.2519 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

Looking at the above charts, we see that USD/JPY is trading in the orange zone, which serves as support at the moment. Although the pair may rebound from here, the current position of the daily indicators suggests that further deterioration is just around the corner. However, in our opinion, such price action will be more likely and reliable if USD/JPY closes today’s session (and the whole week) under the orange zone. In this case, we’ll see further deterioration and the initial downside target would be around 104.2, where the 38.2% Fibonacci retracement (based on the Jun-Jul upward move) and mid- Jul lows are.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish 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.

USD/CAD

From the medium-term perspective, we see that USD/CAD broke above the upper border of the consolidation, which is a positive signal that suggests further improvement, but will we see such price action? Let’s examine the daily char and find out.

On Wednesday, we wrote the following:

(…) although currency bears pushed USD/CAD under the upper border of the red declining trend channel in the previous week, buy signals generated by the indicators encouraged their opponents to act, which resulted in invalidation of earlier breakdown. Taking these facts into account, we think that the exchange rate will re-test the yellow resistance zone and the upper border of the blue rising trend channel in the coming day(s).

On the daily chart, we see that the situation developed in line with the above scenario and USD/CAD reached our upside target. As you see, the combination of the yellow resistance zone and the upper border of the blue rising trend channel was strong enough to stop currency bulls several times in recent weeks. Additionally, the CCI and Stochastic Oscillator are overbought, which suggests that history will repeat itself once again and we’ll see another reversal and decline from here in the coming days. In this case, the initial downside target would be around 1.2903, where the upper border of the red declining trend channel currently is.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
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.

USD/CHF

Looking at the daily chart, we see that the yellow resistance zone triggered a pullback yesterday, which means that our previous commentary is still valid:

(…) USD/CHF (…) increased to the yellow resistance area once again. Although this is a positive event, we should keep in mind that this resistance was strong enough to stop currency bulls in the previous week and earlier in May. Additionally, all indicators are very close to generating sell signals, which suggests that reversal and lower values of USD/CHF are just around the corner. If this is the case, and the pair declines, the first downside target would be the previously-broken orange zone, which serves now as the nearest support. If it is broken, we may see declines to around 0.9683, where the Jul 5 low is.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
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.

AUD/USD

On the above charts we see that AUD/USD is consolidating under the previously-broken lower border of the blue rising trend channel, which means that a breakdown under 0.7452 (the Jul 20 low) will trigger further deterioration and a test of the Jul 6 low of 0.7406. However, the current position of the indicators (which are oversold and very close to generating buy signals) suggests that the space for declines may be limited and reversal is just around the corner. Nevertheless, in our opinion, as long as there won’t be invalidation of the breakdown under the lower border of the blue rising trend channel another bigger upward move is not likely to be seen.

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. 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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