Yesterday, the euro moved sharply higher against the greenback, which took EUR/USD above 1.0800. With this increase, the exchange rate re-tested the key resistance zone. Will it stop currency bulls once again?

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: short (a stop-loss order at 0.7873; the initial downside target at 0.7498)

EUR/USD

Looking at the above charts, we see that EUR/USD moved a bit lower earlier today, which suggests that our previous commentary on this currency pair is up-to-date also today:

(…) 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.

(…) 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 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.

GBP/USD

Yesterday, GBP/USD moved higher once again, which resulted in a breakout above the orange resistance zone and took the exchange rate to the 61.8% Fibonacci retracement. Earlier today, currency bears pushed the pair a bit lower, which took GBP/USD under this resistance. Taking this invalidation of the breakout and the current position of the indicators (the CCI and the Stochastic Oscillator are very close to generating sell signals) into account, we think that lower values of the exchange rate are just around the corner. If this is the case and GBP/USD closes today’s session under the 61.8% Fibonacci retracement, currency bears will receive another reason to act. In this case, we’ll see further deterioration and a decline to the recent lows in the coming week.

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 1.2576 and the initial downside target at 1.2157) 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 Monday, we wrote:

(…) AUD/USD not only reached the February high, but also climbed slightly above it. Despite this bullish event, the pair gave up some gains and slipped below the previous high, invalidating the earlier breakout. Additionally, the CCI and the Stochastic Oscillator are very close to generating sell signals, which increases the probability of another downward move.

From today’s point of view, we see that the situation developed in line it the above scenario and AUD/USD declined sharply yesterday. Earlier today, the exchange rate dropped under the previously-broken lower border of the red rising trend channel, which is an additional bearish development. Taking all the above and the sell signals generated by the indicators into account, we believe that opening short positions is justified from the risk/reward perspective. How low could the exchange rate go in the coming days? In our opinion, the initial downside target will be the March low and the green support zone.

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 0.7873 and the initial downside target at 0.7498) 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

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