Although yesterday’s small decline in the USD Index pushed the Australian dollar higher, two important resistances successfully stopped further improvement, triggering a pullback. What impact did this price action have on the technical picture of AUD/USD?

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: short (a stop-loss order at 1.0000; initial downside target at 0.9841)
• AUD/USD: short (a stop-loss order at 0.7769; initial downside target at 0.7542)

EUR/USD

Looking at the above charts, we see that although EUR/USD moved higher yesterday, the pair gave up some gains later in the day. Earlier today, the situation hasn’t changed much as the pair is trading between yesterday’s levels. This means that our previous commentary on this currency pair is up-to-date also today:

(…) the green support zone in combination with buy signals generated by all daily indicators encouraged currency bulls to act, which resulted in a rebound above 1.0900. Taking these facts into account, we think that the pair will extend gains and climb to the previously-broken grey zone and the red declining resistance line in the coming 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/CAD

The first thing that catches the eye on the weekly chart is a breakout above the upper border of the purlpe rising wedge. Although this is a positive signal, we think that it would moe reliable only if the exchange rate closes this week above this support/resistance line. At this point, it is also worth oting that the CCI and Stochastic Oscillator are voerbought, which suggests that reversal may be just around the corner.

Having said the above, let’s check how did this increase affect the very short-term picture.

From today’s point of view, we see that although USD/CAD broke above the upper border of the violet rising wedge and the upper line of the blue rising trend channel, currency bulls didn’t manage to hold gained levels, which resulted in a pullback earlier today. With this move, the exchange rate invalidated earlier small breakout above these resistance lines, which doesn’t bode well for further rally – especially when we factor in the current position of the weekly and daily indicators. Therefore, in our opinion, another attempt to move lower is very likely. If this is the case, and the pair declines from current levels, the initial downside target would be around 1.3153, where the 38.2% Fibonacci retracement (based on the mid-Aug – Oct upward move) is.

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. Nevertheless, if we see a daily closure below both above-mentioned lines and sell signals generated by the indicators), we’ll consider re-opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

Looking at the above charts, we see that although AUD/USD moved sharply higher yesterday, the orange resistance zone in combination with the red declining resistance line successfully stopped currency bulls. As a result, the exchange rate declined, erasing earlier gains and invalidating small breakout. This negative event encouraged currency bears to act, which triggered further deterioration earlier today. Taking all the above into account, we think that AUD/USD will extend losses in the coming days and the initial downside target would be around 0.7542, where the 61.8% Fibonacci retracement (based on the recent upward move) is.

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

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