Official Australian data showed that the unemployment rate dropped to 6.2% and 11,500 jobs were added, which pushed AUD/USD higher earlier today. As a result, the exchange rate approached the resistance zone, but will we see further improvement in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.1445; the downside target around 1.0938)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

From the weekly perspective the situation hasn't changed much as EUR/USD is still trading under the long-term red line and the previously-broken orange resistance zone, which suggests lower values of the exchange rate in the coming week (especially when we factor in sell signals generated by the indicators).

What can we infer from the very short-term chart? Let's check.

Looking at the daily chart we see that although EUR/USD extended gains earlier today, the previously-broken upper border of the rising trend channel (marked with green) triggered a pullback, which suggests that as long as there is no invalidation of the breakdown under this line further deterioration is more likely than not. If this is the case, and EUR/USD extends losses from here, we'll see a test of the last week's low in near future. If it is broken, the next downside target would be around 1.1030, where the size of the downward move will correspond to the height of the blue consolidation and where the mid-Aug lows are.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed with bearish bias
LT outlook: mixed

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1445 are justified from the risk/reward perspective. The downside target around 1.0938. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

The medium-term picture hasn't changed much as USD/CAD is trading above the 2008 high. Today, we'll focus on the daily chart.

From today's point of view, we see that the overall situation in the short-term hasn't changed much as USD/CAD is still trading in the blue consolidation. Therefore, what we wrote on Friday is still valid:

(…) we think that as long as there is no breakout above the upper line of the formation another test of the green resistance line is not likely to be seen. On the other hand, a sizable downward move is also questionable unless we see a daily closure below the lower border of the consolidation (in this case, the initial downside target would be around 1.2950-1.3015, where the bottom of the previous pullback and the 23.6% Fibonacci retracement based on the entire May-Aug rally are).

Very short-term outlook: mixed
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

Looking at the daily chart, we see that although AUD/USD declined below the lower border of the orange declining wedge at the end of the previous week, the pair reversed and invalidated the breakdown on Monday. Taking this positive signal into account, and combining it with buy signals generated by the indicators, we think that currency bulls will try to push the exchange rate higher and test the strength of the upper line of the formation. If they succeed, the next upside target would be around 0.7200, where the orange resistance dashed line and the 23.6% Fibonacci retracement (based on the entire May-Sep declines) are (the orange ellipse on the above chart).

But will we see such improvement? Let's take a closer look at the weekly chart and check what we can infer from it.

From this perspective we see that AUD/USD reversed and climbed to the previously-broken green zone based on the 76.4% and 78.6% Fibonacci retracement levels (the nearest resistance at the moment), which suggests that the current upswing may be just a verification of earlier breakdown and another attempt to move lower should not surprise us. Therefore, in our opinion, as long as there is no invalidation of the breakdown further improvement (and realization of the pro-growth scenario) is questionable.

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 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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