Earlier today, the euro moved lower against the greenback and broke below the lower border of the short-term rising trend channel. Will this negative event encourage currency bears to act in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
On Tuesday, we wrote the following:
(…) If (…) EUR/USD moves higher from here, we’ll see a re-test of the strength of the yellow resistance zone and even a climb to the 50% Fibonacci retracement based on the November-January downward moves.
From today’s point of view, we see that the situation developed in tune with our assumptions and EUR/USD reached the 50% Fibonacci retracement yesterday. What’s next? Taking into account the breakdown under the lower border of the blue rising trend channel and the sell signals generated by the indicators, we think that the pair will extend losses in the coming days (especially if the exchange rate closes today’s session under this line). If this is the case, the initial downside target will be the green support zone seen on the daily chart.
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 EUR/USD closes today’s session under the lower border of the blue rising trend channel, we’ll consider opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
Quoting our Forex Trading Alert posted on February 23:
(…) the exchange rate climbed above the previously-broken lower border of the red declining trend channel, invalidating the earlier breakdown. This is a positive signal (…), which suggests that we may see an increase even to the upper border of the purple declining trend channel seen on the daily chart. In this area is also the yellow resistance zone marked on the weekly chart, which could stop further improvement.
Looking at the charts, we see that currency bulls pushed GBP/USD higher as we had expected. With the recent upward move the exchange rate approached our upside targets, which encouraged currency bears to act. As a result, GBP/USD moved sharply lower and the CCI and the Stochastic Oscillator generated sell signals, which suggest further deterioration in the coming days. How low could the exchange rate go? In our opinion, the initial downside target will be the 38.2% Fibonacci retracement (around 1.2431) and this week’s low of 1.2410.
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
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 situation in the very short term hasn’t changed much since our last commentary on this currency pair as USD/CHF is consolidating under the previously-broken green zone. Nevertheless, the CCI and the Stochastic Oscillator generated the buy signals, which suggest that currency bulls will try to push the pair higher in the coming days. If this is the case and we see such price action the initial upside target will be the orange resistance zone. However, in our opinion, further improvement will be more likely and reliable if USD/CHF breaks above the upper border of the purple declining trend channel seen on the daily chart.
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. However, if USD/CHF breaks above the upper border of the purple declining trend channel seen on the daily chart, we’ll consider opening long positions. 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
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