Although today’s data showed that U.K. manufacturing purchasing managers’ index rose to 51.0 in the previous month, the reading disappointed expectations for an increase to 51.2, which pushed GBP/USD lower. Will we see further deterioration in the coming week?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (stop-loss order at 1.1512; initial downside target at 1.0572)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Looking at the weekly chart, we see that although EUR/USD moved little higher, the key orange resistance zone (which successfully stopped currency bulls several times in the past) continues to keep gains in check. Therefore, in our opinion, as long as the pair is trading below it another reversal from here and lower values of the exchange rate are very likely.
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 1.1512 and the initial downside target at 1.0572) 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.
GBP/USD
Quoting our last commentary on this currency pair:
(…) the red horizontal line in combination with the pink declining support line encouraged currency bulls to act, which triggered a sharp rebound in recent days. Taking this fact into account, and buy signals generated by the indicators, it seems that GBP/USD will re-test the orange resistance zone (…) in the coming week.
As you see on the daily chart, although GBP/USD moved higher earlier this week, the proximity to the orange resistance zone encouraged currency bears to act, which resulted in a pullback. Additionally, the Stochastic Oscillator generated a sell, which suggests a test of the green support line based on the recent lows (currently around 1.4138) in the coming week. Finishing today’s commentary on this currency pair it’s worth noting that in this area is also support area created by the 76.4% and 78.6% Fibonacci retracement levels based on the recent upward move.
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.
USD/CHF
On Wednesday, we wrote the following:
The first thing that catches the eye on the daily chart is drop under the previously-broken lower border of the brown declining trend channel, which in combination with sell signals generated by the indicators is a bearish signal that suggests further deterioration. (…) today’s sharp drop took the pair under the medium-term green support line, which is an additional bearish signal.
From today’s point of view, we see that the situation developed in line with the above scenario and USD/CHF extended losses, slipping to the 70.7% Fibonacci retracement. Although the pair could rebound slightly from here, sell signals generated by the indicators remain in place, suggesting further drops. If this is the case, and the exchange rate moves lower once again, the next downside target would be the green support zone marked on the daily chart (created by the 76.4% and 78.6% Fibonacci retracement levels based on entire Aug-Nov upward move).
Very short-term outlook: bearish
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. 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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