Earlier today, the National Australia Bank reported that its business confidence index declined to zero in the previous month from a reading of 3 in Jan, which pushed AUD/USD to a fresh 2015 low. How low could the exchange rate go?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: none
- USD/JPY: none
- USD/CAD: short (stop loss order at 1.2876)
- USD/CHF: none
- AUD/USD: none
EUR/USD
The situation in the medium term has deteriorated as EUR/USD moved lower once again and broke under the support zone based on the Aug and Sep 2003 lows, which suggests further deterioration and a drop to around 1.0634, where the long-term green support line (based on the Oct 2000 and Jul 2001 lows) is.
Are there any short-term support levels that could hinder the realization of the above scenario? Let’s examine the daily chart and find out.
From this perspective, we see that EUR/USD broke below the medium-term red support line, which s a bearish signal that suggests further declines in the coming day(s). If this is the case, the initial downside target would be around 1.0640, where the 173.2% Fibonacci extension is.
Very short-term outlook: bearish
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
The medium-term picture remains bullish as USD/CHF extended gains and buy signals generated by the indicators are still in play, supporting further improvement.
How high could the exchange rate go? Let’s examine the daily chat and find out.
On Friday, we wrote the following:
(…) If (…) USD/CHF breaks above the barrier of 0.9700, we’ll likely see a rally to around 0.9797-0.9844, where the orange resistance zone created by the 76.4% and 78.6% Fibonacci retracement levels is.
As you see on the daily chart, currency bulls not only realized the above-mentioned scenario, but also managed to break above the orange resistance zone, which is a positive signal that suggests further improvement and a test of the psychologically important barrier of 1.0000. If this resistance level is broken, the next target would be around 1.0024, where the 88.6F Fibonacci retracement level is.
Nevertheless, we should keep in mind that the CCI and Stochastic Oscillator are overbought, while RSI climbed above the level of 80, which suggests that the space for rally might be limited and the probability of a trend reversal is just around the corner (especially if the indicators generate sell signals in the coming days).
Very short-term outlook: bullish
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
AUD/USD
The situation in the medium term has deteriorated as AUD/USD reversed and declined below the Jul 2009 lows once again. This is a bearish signal that suggests further deterioration and a drop to around 0.7504, where the 70.7% Fibonacci retracement is.
Having said that, let’s take a closer look at the daily chart.
Quoting our last commentary on this currency pair:
(…) the proximity to the upper border of the consolidation (marked with blue) and the long-term orange resistance line encouraged currency bears to act, which resulted in a pullback. (…) as long as there is no breakout above the (…) resistance zone, another attempt to move lower is likely. If this is the case, the initial target for currency bears would be around 0.7718-0.7738 where the Feb 24 and the lower line of the consolidation are.
Looking at the above chart, we see that currency bears pushed the exchange rate lower as we expected. With the recent declines AUD/USD dropped under the lower border of the consolidation, hitting a fresh 2015 low of 0.7602, which suggests a drop to around 0.7542, where the size of the downward move will correspond to the height of the formation.
Very short-term outlook: bearish
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 at the moment. 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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