Earlier today, the USD Index moved lower after the release of mixed U.S. economic reports, which pushed the Australian dollar higher against its U.S. counterpart. As a result, AUD/USD increased above the medium-term declining resistance line. Breakout or another fakeout?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
On the daily chart, we see that although EUR/USD moved sharply lower and approached the brown rising support line, this deterioration was very temporary and the exchange rate rebounded sharply in the following hours. As a result, the pair came back to the blue consolidation. Taking this fact into account and combining it with a strong buy signal generated by the Stochastic Oscillator, we think that further improvement is just around the corner. Nevertheless, such price action would be more likely if we see a breakout above the upper border of the consolidation (1.1302). In this case, EUR/USD will likely test the Jun high and the 61.8% Fibonacci retracement in the following days.
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.
USD/CHF
Looking at the weekly chart, we see that USD/CHF declined under the brown declining suuuprt/resistance line, which encouraged currency bears to act. How did this dop affect the very short-term picture? Let’s check below.
From this perspective, we see that the proximity to the red declining resistance line in combination with the medium-term picture pushed the pair lower earlier today. As a result, USD/CHF invalidated breakout above the previously-broken 61.8% Fibonacci retracement, which suggests a test of recent lows in the coming day(s).
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.
AUD/USD
On the weekly chart, we see that AUD/USD came back above the red declining resistance line, which in combination with buy signals generated by the indicators, suggests further improvement in the coming days. Nevertheless, such price action would be more likely and reliable if the pair closes this week above this line.
Having said the above, let’s examine the daily chart and find out what can we infer from it.
Quoting our Tuesday’s alert:
(…) sell signals are still in play, which suggests that another attempt to move lower is likely. If this is the case, the initial downside target would be the brown declining line, which serves now as the nearest support.
Looking at the daily chart, we see that the situation developed in line with the above scenario and the exchange rate reached our downside target. As you see this brown support line triggered a sharp rebound, which in combination with buy signal generated by the indicators and the medium-term picture suggests further improvement. If this is the case and the pair increases from here, the initial upside target would be the orange resistance zone, which stopped currency bulls earlier this month.
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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