Earlier today, official data showed that the Australian Industry Group construction index dropped 5.5 points to 45.9, which pushed AUD/USD under the multi-month resistance line once again. Will this time currency bears take control?

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

• EUR/USD: none
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (a stop-loss order at 0.7769; initial downside target at 0.7542)

EUR/USD

The first thing that catches the eye on the weekly chart is a drop under the blue dashed support/resistance line, which is a negative signal that suggests further deterioration in the coming week (however, in our opinion, it would be more reliable if we see a weekly closure below this line).

Are there any other factors that could encourage currency bears to act? Let’s examine the daily chart and find out.

From today’s point of view, we see that although EUR/USD increased on Friday, the yellow resistance zone stopped further improvement, triggering a pullback and a drop to the orange area. Therefore, we believe that what we wrote on Thursday is up-to-date also today:

(…) EUR/USD reversed and declined after an increase to the yellow resistance zone. Taking this fact into account and combining it with the current position of daily indicators (the CCI and the Stochastic Oscillator are very close to generating sell signals), we think that further deterioration is just around the corner. Therefore, if the exchange rate drops under the orange zone, 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. However, if the exchange rate drops under the orange zone, we’ll consider opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/JPY

On Friday, we wrote:

(…) the yellow zone (…) triggered a small rebound earlier today (similarly to what we saw around a month ago), which in combination with the current position of the indicators (they are oversold and very close to generating buy signals) suggests that reversal in the coming week is very likely.

Looking at the above chart, we see that currency bulls took the opportunity and pushed USD/JPY higher as we had expected. With this upward move, the pair reached the red resistance zone (created by the Sep, mid-Oct highs and the 61.8% Fibonacci retracement), which could pause further improvement. Nevertheless, the current position of the indicators suggests that another attempt to move higher is very likely. If this is the case and the exchange rate climbs above the red area, the next upside target would be the Oct high and the orange resistance zone.

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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

As you see on the above charts, although AUD/USD moved higher once again in recent days, the orange resistance zone in combination with the red declining resistance line continue to keep gains in check. Additionally, the CCI and Stochastic Oscillator are overbought and very close to generating sell signals, which suggests that lower values of the exchange rate are ahead us. If this is the case, and the pair declines from here, the initial downside target would be around 0.7552, where the 61.8% Fibonacci retracement (based on the recent upward move) and the green support line (based on previous lows) are.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 0.7769 and initial downside target at 0.7542) 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, Gold & Silver Fund Manager

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts