Although the U.S. Commerce Department reported that the number of building permits issued in December declined by 1.9%, the data also showed that U.S. housing starts increased by 4.4% last month. Thanks to these mixed numbers, the greenback moved lower, which pushed EUR/USD to the previously-broken 2005 low. Is this a verification of the breakdown or rather the first step to higher values?

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

• EUR/USD: none
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: long (stop loss: 0.7940; initial upside target: 0.8320)

EUR/USD

As you see on the daily chart, although EUR/USD moved higher earlier today, the pair gave up gains and slipped below the key resistance based on the Nov 2005 low once again. Taking this fact into account, we believe that our last commentary on this currency pair is up-to-date:

(…) the pair is still trading under the previously-broken 2005 low. In our opinion, as long as there is no invalidation of the breakdown, higher values of the exchange rate are not likely to be seen and another test of the 127.2% Fibonacci extension should not surprise us. However, taking into account the current position of the daily indicators (they all generated buy signals), it seems that currency bulls will try to push EUR/USD higher in the coming days. In this case, if we see an invalidation of the breakdown under the 2005 low, the initial upside target would be around 1.1876, where the previously-broken 2010 low and the 38.2% Fibonacci retracement (based on the Dec-Jan decline) are.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term): In 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

Looking at the daily chart, we see that although USD/CHF invalidated a breakdown below the Mar 2014 lows and the 50% Fibonacci retracement, climbing above the 23.6% Fibonacci retracement (based on the recent decline), the pair reversed and declined below these important levels once again. This negative signal suggests that we could see a test of the recent low or even a drop to the 61.8% Fibonacci retracement (seen more clearly on the weekly chart) in the coming days.

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

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

Earlier today, the orange declining resistance line triggered a pullback, which took the exchange rate to slightly above the 2010 low. We saw similar price action a week ago. Back then, this key support level encouraged currency bulls to act, which translated to an upward move. Taking this fact into account, and the proximity to the green support zone, we think that we’ll see another upswing from here in the coming day(s). If this is the case, the initial upside target would be the above-mentioned orange declining resistance line (currently around 0.8257).

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 0.7940 and an initial upside target at 0.8320. 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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