Earlier today, official data showed that Australian employment change dropped by 9,800 jobs, widely missing analysts’ expectations. Additionally, a participation rate declined to 64.5%, also missing forecasts. Thanks to these circumstances, AUD/USD declined sharply, invalidating yesterday’s breakouts. What does it mean for the exchange rate?

In our opinion the following forex trading positions are justified - summary:

• EUR/USD: none
• GBP/USD: none
• USD/JPY: short (a stop-loss order at 104.84; initial downside target at 101.02)
• USD/CAD: none
• USD/CHF: short (a stop-loss order at 0.9954; initial downside target at 0.9778)
• AUD/USD: short (a stop-loss order at 0.7769; initial downside target at 0.7542)

EUR/USD

From today’s point of view, we see that currency bears pushed EUR/USD lower once again, which resulted in a re-test of the grey support zone yesterday. Earlier today, we saw another attempt to move lower, but the Jul lows continue to keep declines in check. Additionally, the current position of the indicators (which already generated buy signals) suggests that reversal and higher values of EUR/USD are just around the corner. Nevertheless, in our opinion, as long as there won’t be a daily closure above the red declining line (based on the May and Jun highs) a bigger move to the upside is not likely to be seen and short-lived moves in both directions should not surprise us.

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. Nevertheless, if we see an invalidation of the breakdown below the red declining line, we’ll consider opening long positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

From today’s point of view, we see that USD/CAD moved higher and climbed above the upper border of the blue consolidation, invalidating earlier decline, which suggests further improvement.

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

Quoting our yesterday’s alert:

(…) What’s next? (…) the proximity to the Fibonacci retracement triggered a pullback yesterday. Despite this move, currency bears didn’t give up and pushed the pair lower, which means that we’ll see a test of the green support zone in the coming day(s).

Looking at the daily chart, we see that the situation developed in line with the above scenario and USD/CAD reached our downside target. As you see, this support triggered a sharp rebound, which in combination with buy signals generated by the indicators and the medium-term picture suggests further improvement. Therefore, closing short positions and taking profits off the table is justified from the risk/reward perspective.

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed with bullish 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.

AUD/USD

Yesterday, we wrote:

(…) we think that (…) we’ll see another reversal from current levels – especially when we factor in the proximity to the lower border of the rising purple wedge and the red declining resistance line based on the previous highs. On top of that, the CCI and Stochastic Oscillator are overbought, which increases the probability of reversal in very near future.

On the daily chart, we see that although AUD/USD moved higher and broke above the orange resistance zone, the red declining resistance line and the lower border of the rising purple wedge yesterday, this improvement was temporary and the exchange rate reversed earlier today. With this downswing the pair invalidated yesterday’s breakouts, which in combination with the current position of the indicators suggests further deterioration in the coming days. If his is the case and AUD/USD moves lower from here, 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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