Yesterday’s disappointing data on U.S. private sector jobs growth pushed the USD Index below 94. As a result, EUR/USD broke above important resistance zone, opening the way to higher levels. How high could the exchange rate go in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the charts, we see that EUR/USD extended gains and broke above the 23.6% and 38.2% Fibonacci retracement levels. This positive signal triggered further improvement earlier today, which suggests an increase to the orange resistance zone created by the Feb highs and the 50% Fibonacci retracement marked on the daily chart (around 1.1450-1.1512) in the coming day(s). Nevertheless, we should keep in mind that the current position of the indicators suggests that the space for further rally might be limited and reversal is just around the corner.
Very short-term outlook: bullish
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/CAD
In our last commentary on this currency pair, we wrote the following:
(…) USD/CAD is trading in a consolidation (marked with blue) between the long-term green support line and the previously-broken lower border of the declining trend channel. Therefore, we think that a breakout/breakdown will likely show the direction of future moves. Nevertheless, a sell signal generated by the Stochastic Oscillator could encourage currency bears to act. If this is the case, and the pair breaks below the lower border of the formation, we’ll see another test of the strength of the long-term green support line (currently around 1.1985) in the coming days.
From today’s point of view we see that currency bears pushed the exchange rate lower (as we expected) and USD/CAD re-tested the strength of the 38.2% Fibonacci retracement (marked on the weekly chart) and the long-term green support line (marked on the daily chart). Despite this drop, currency bulls managed to push the pair higher and invalidate yesterday’s small breakdown once again. This is a positive signal, which suggests further improvement and an increase to around Monday’s high of 1.2179 in the coming day(s).
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
AUD/USD
Quoting our Tuesday’s Forex Trading Alert:
(…) it seems to us that buy signal generated by the Stochastic Oscillator will encourage currency bulls to push the exchange rate higher. How high could AUD/USD go? If the pair closes the day above the brown line, we’ll likely see an increase to around 0.8000, where the 23.6% Fibonacci retracement (based on the entire June-March declines and marked on the weekly chart) and the resistance zone (created by the 76.4% and 78.6% Fibonacci retracement levels based on the recent downward move) are. Please keep in mind that as long as there is no successful breakout above this area, further rally is questionable.
As you see on the charts, the situation developed in line with the above scenario and AUD/USD re-tested the resistance zone created by the 23.6% and 76.4% and 78.6% Fibonacci retracement levels. Despite yesterday’s increase, this solid resistance area stopped further rally, triggering a pullback to the brown support line. Although signals generated by the daily indicators are mixed (the CCI generated a sell signal, while a buy signal generated by the Stochastic Oscillator remains in play), we think that as long as there is no daily close below this line, further deterioration is not likely to be seen and another attempt t move higher should not surprise us.
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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