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

• EUR/USD: short (a stop-loss order at 1.0967; the initial downside target at 1.0521)
• GBP/USD: short (a stop-loss order at 1.2738; the downside target at 1.2157)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: long (a stop-loss order at 0.9708; the upside target at 1.0145)
• AUD/USD: short (a stop-loss order at 0.7873; the initial downside target at 0.7498)

EUR/USD

The first thing that catches the eye on the monthly chart is an invalidation of the tiny breakout above the long-term green support line, which is a bearish development. When we take a closer look at the above chart, we can notice a similar price action in December. Back then, an invalidation of the breakout triggered a pullback, which took EUR/USD to fresh lows. Will we see a similar price action in the coming month? Let’s examine the charts below and find out.

On the weekly chart, we see that EUR/USD also invalidated the earlier breakout above the yellow resistance zone and two important Fibonacci retracements, which gives currency bears another reason to act.

How did this drop affect the very short-term picture? Let’s check.

Quoting our yesterday’s alert:

(…) EUR/USD reached to the upper border of the orange rising trend channel yesterday. (…) the pair also broke above the December high, but the above-mentioned resistance line together with the proximity to the 1.272% Fibonacci extension encouraged currency bears to act, which resulted in a pullback. Thanks to this drop the pair invalidated the earlier small breakout, which is a negative signal. Additionally, the current position of the indicators also favors currency bears, suggesting that a bigger move to the downside is just around the corner. Nevertheless, in our opinion, such price action will be more reliable if EUR/USD drops below the lower border of the orange rising trend channel (currently around 1.0783) and the long-term green support line seen on the monthly chart below.

From today’s point of view, we see that the situation developed in line with the above scenario and EUR/USD moved sharply lower, breaking under the lower border of the orange rising trend channel. Taking this fact and the long- and medium-term pictures into account, we think that opening short positions is justified from the risk/reward perspective. If the exchange rate extends declines from current levels, we’ll see a drop to (at least) 1.0521 in the coming days.

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 1.0967 and the initial downside target at 1.0521) 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

Yesterday we wrote the following:

(...) the exchange rate approached the blue declining resistance line based on the previous highs, which encouraged currency bears to act. As a result, the pair gave up some gains, but it is still trading in the purple rising trend channel, (…) Nevertheless, the current position of the indicators suggests that a bigger downward move is just around the corner. Therefore, if GBP/USD declines and closes today’s or one of the following sessions below the purple rising support line we’ll likely open short positions.

From today’s point of view, we see that currency bears pushed GBP/USD under the lower border of the purple rising trend channel as we had expected, which means that short positions are justified from the risk/reward perspective.

How low could the exchange rate go if we see such breakdown? We believe that the best answer to this question will be the quote from yesterday’s alert:

(…) In our opinion, the initial downside target for currency bears will be around 1.2333-1.2338, where last week’s lows are. If this support is broken, we’ll see a decline to the March lows and the green support zone in the coming week(s).

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 1.2738 and the downside target at 1.2157) 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.

USD/CHF

Looking at the chrts, we see that the proximity to the previously-broken red line (based on the November 2015 and January 2016 and marked on the weekly chart) encouraged currency bulls to act, which resulted in a sharp rebund. As a result, the exchange rate invalidated the earlier breakdown below the green support zone seen on the daily chart, which is a bullish development. Additionally, the CCI and the Stochastic Oscillator generated the buy signals, which suggests further improvement.

How high could the exchange rate go in the coming days? In our opinion, the initial upside target will be around 1.0145, where the early March highs are. Taking all the above into account, we believe that oening long positions is justified from the risk/reward perspective.

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

Trading position (short-term; our opinion): Long positions (with a stop-loss order at 0.9708 and the upside target at 1.0145) 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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