Earlier today, data showed that Australia fourth quarter GDP increased by 0.5% as expected quarter-on-quarter, taking the annual pace to 2.5%. Thanks to these numbers, AUD/USD moved higher and approached an important resistance zone. Will we see a breakout in the coming days?

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

Looking at the charts, we see that the overall situation has deteriorated once again as EUR/USD extended losses below the 61.8% Fibonacci retracement (based on the entire 2000-2008 rally) and the previously-broken the Feb lows. Taking this fact into account, we believe that our last commentary is up-to- date:

(…) we could see further deterioration in the coming days. If this is the case, the downside target for currency bears would be the 2015 low of 1.1097.

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.

GBP/USD

From the daily perspective, we see that GBP/USD extended losses and dropped to the green support zone. Although we could see a rebound from here, it seems that the space for growth is limited as the previously-broken lower border of the rising trend channel serves as the nearest resistance. Taking this fact into account, and combining it with the position of the indicators (the CCI and Stochastic Oscillator are oversold, but there are no buy signals at the moment), we think that further deterioration is just around the corner. If this is the case, the downside target from our last commentary on this currency pair will be in play:

(…) if currency bulls fail, the exchange rate might drop even to around 1.5176-1.5195, where the Feb 10 and the 61.8% Fibonacci retracement (based on the entire recent rally) is. Will we see further deterioration? Taking into account the current position of the indicators, the bearish scenario is more likely at the moment. Nevertheless, it seems to us that we’ll see such low values of the exchange rate only if currency bears break below the medium-term support area around 1.5268-1.5318

And speaking of the medium-term picture... Let’s examine it and find out whether yesterday’s downswing affects it or not.

As you see on the weekly char, the medium-term picture hasn’t changed much as GBP/USD still remains above the previously-broken upper border of the consolidation and the long-term green support line, which serve as the major support at the moment. Nevertheless, taking into account the current position of the Stochastic Oscillator, it seems to us that we could see a test of this support area in the coming week.

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 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 hasn’t changed much as an invalidation of the breakdown below the Jul 2009 lows and its potential positive impact on future moves is still in effect.

Having said that, let’s take a closer look at the daily chart.

On the above chart, we see that although the pair moved higher yesterday, the upper border of the consolidation (marked with blue) still holds. Additionally, this area is reinforced by the long-term orange resistance line, which means that as long as there is no breakout above this 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.

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 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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