Earlier today, EUR/USD slipped to two important support lines. Will they withstand the selling pressure in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
From today’s point of view, we see that EUR/USD declined yesterday and broke below the previously-broken upper border of the pink consolidation, invalidating the earlier breakout. This negative event resulted in a drop to the lower border of the blue rising trend channel. Although this support can encourage currency bulls to act, we should keep in mind that the CCI and the Stochastic Oscillator generated the sell signals, suggesting lower values of the exchange rate in the coming days. Nevertheless, in our opinion, further deterioration will be more likely and reliable if EUR/USD closes today’s or one of the following days under the lower border of the blue trend channel and the long-term red support line based on the March and November lows (marked on the weekly chart). If we see such price action, we’ll consider opening short positions.
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. However, if we see a daily closure under the lower border of the blue trend channel and the long-term red support line based on the March and November lows (marked on the weekly chart) we’ll consider opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
Looking at the above charts, we see that the breakdown under the lower border of the purple declining trend channel (seen on the daily chart) approached USD/CAD to the January lows. Although the pair rebounded in recent days, the exchange rate still remains under the previously-broken lower purple resistance line, which suggests that the current upswing could be nothing more than a verification of the earlier breakdown. Additionally, the sell signal generated by the daily Stochastic Oscillator and the sell signals generated by the weekly indicators remain in place suggesting lower values of USD/CAD in the coming days. If this is the case and the exchange rate declines from here, we’ll see a realization of the bearish scenario from our Wednesday’s alert:
(…) What’s next? Taking into account the sell signals generated by the indicators, it seems that the exchange rate will move lower once again and test the lower border of the blue rising tend channel (seen on the daily chart) in the coming days.
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
AUD/USD
Quoting our last commentary on this currency pair:
(…) currency bulls pushed AUD/USD higher as we had expected and the exchange rate reached our upside target. Taking this fact and the sell signals generated by the indicators into account, we think that the pair will move lower in the coming days.
On the daily chart, we see that the situation developed in line with the above scenario and AUD/USD declined to its first support zone. Although this area triggered a rebound earlier today, the sell signals generated by the indictors remain in place, supporting currency bears and another attempt to move lower. If this is the case and the exchange rate drops under the green support zone, the initial downside target will be around 0.7437, where the 38.2% Fibonacci retracement (based on the December-January upward move) and the lower border of the blue consolidation are.
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. 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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