Earlier today, the USD Index extended losses and moved below the level of 100, which pushed USD/CAD below the last week’s lows. Will we see further deteriorate in the coming days?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: short (a stop-loss order at 1.2576; the initial downside target at 1.2157)
- USD/JPY: none
- USD/CAD: none
- USD/CHF: long (a stop-loss order at 0.9891; the initial upside target at 1.0180)
- AUD/USD: none
EUR/USD
On the daily chart, we see that EUR/USD extended gains and broke above the last week’s high, which resulted in a breakout above the orange resistance line based on the previous highs. In this way, the exchange rate approached the February high and reached the yellow resistance zone. Additionally, there are negative divergences between the CCI and the Stochastic Oscillator and the exchange rate, which suggests that reversal may be just around the corner.
How did this increase affect the medium-term picture? Let’s check.
From this perspective, we see that slightly above the current levels there are two important Fibonacci retracements: the 50% retracement based on the November-January downward move and the 38.2% retracement based on the entire May – January decline, which increases the probability of reversal in very near future – especially when we factor in the long-term picture of the exchange rate.
On the monthly chart, we see that the exchange rate reached the previously-broken long-term green line, which looks like another verification of the earlier breakdown. If this is the case, EUR/USD will reverse and decline from current levels in the coming week.
Very short-term outlook: mixed
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/JPY
On Thursday, we wrote the following:
(…) What’s next? The sell signals generated by the indicators suggest that further deterioration is likely. If this is the case and the exchange rate moves lower once again, we’ll likely see a re-test of the green support zone and the 38.22% Fibonacci retracement in the coming day(s).
From today’s point of view, we see that currency bears pushed the exchange rate lower as we had expected. With the recent downward move, USD/JPY slipped to the support area created by the 76.4% and 78.6% Fibonacci retracements, but taking into account that there are no buy signals, another downswing to our next target is very likely.
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.
USD/CAD
Looking at the daily chart, we see that USD/CAD declined earlier today, which means that what we wrote on Friday is up-to-date:
(…) the size of the move is tiny compared to Wednesday’s decline, which suggests that the move to the downside might not be over yet. This scenario is also reinforced by the current position of the indicators (there are no buy signals). Therefore, if USD/CAD moves lower from here, we’ll likely see a drop to around 1.3254-1.3265 or even a test of the 61.8% Fibonacci retracement and the February 7 and February 22 highs in the coming day(s).
Very short-term outlook: bearish
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.
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
