Although the Labor Department reported that the number of initial jobless claims dropped by 1,000 to 266,000, the data missed analysts’ expectation for a decrease by 4,000, which pushed the USD Index lower. What impact did this drop have on the euro, pound and yen?

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

• EUR/USD: none
• GBP/USD: short (a stop-loss at 1.3579; initial downside target at 1.2519)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: short (stop-loss at 0.9895; initial downside target at 0.9651)
• AUD/USD: none

EUR/USD

Looking at the charts, we see that although EUR/USD moved lower earlier today, currency bulls stopped further deterioration and pushed the exchange rate above the upper border of the blue consolidation. Taking this fact into account and combining it with buy signals generated by the indicators, e believe that our yesterday’s commentary remains up-to-date:

(…) it seems that the pair will test the upper border of the medium-term red declining trend channel or even the brown resistance line in the coming days.

Very short-term outlook: bullish
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

GBP/USD

As you see on the daily chart, although GBP/USD increased slightly yesterday, the pair reversed and declined, which suggests that Wednesday’s move could be just a verification of the breakdown below the lower border of the blue consolidation. This scenario is also reinforced by today’s drop, which means that our Monday’s target will be in play in the coming day(s):

(…) we believe that negative image that emerges from the long- and medium-term perspective will trigger another move to the downside in near future. If this is the case, and GBP/USD declines from current levels, we’ll see (at least) a test of the Jul lows.

(…) GBP/USD extended losses (although it is still trading in the blue consolidation) under the lower border of the red declining trend channel and the neck line of the head and shoulders formation, which is a negative signal that suggests further deterioration.

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

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

From today’s point of view, we see that the upper border of the blue consolidation in combination with sell signals generated by the indicators encouraged currency bears to act, which resulted in a decline in recent days. With this move, USD/JPY re-approached the last week’s lows and the green support zone, which could trigger another rebound in the coming day(s). Nevertheless, as long as there won’t be buy signals generated by the indicators another attempt to move lower and a drop to the Jul 8 low and the 88.6% Fibonacci retracement can’t be ruled out.

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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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