Earlier today, the European statistics agency showed that industrial production rose by 1.1% in February, beating expectations for a 0.4% increase. Additionally, year-on-year, industrial production increased by 1.6% in February from a year earlier, also beating forecast for a 0.7% gain. Will these positive numbers encourage currency bulls to act?

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

• EUR/USD: none
• GBP/USD: none
• USD/JPY: none
• USD/CAD: short (stop loss order at 1.2876)
• USD/CHF: none
• AUD/USD: none

EUR/USD

On the above charts, we see that the overall situation hasn’t changed much as EUR/USD still remains under the long-term green support/resistance line, the lower border of the long-term brown declining trend channel (both marked on the weekly chart), the upper border of the blue declining trend channel and the lower line of the consolidation (both seen on the daily chart). All these resistance lines keep gains in check, suggesting a test of the March lows. Nevertheless, the CCI and Stochastic Oscillator are oversold and very close to generate buy signals, which could translate to rebound in the coming day(s).

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.

USD/JPY

The medium-term outlook remains mixed as USD/JPY is still trading in a consolidation (between the Dec high and low) around the 61.8% Fibonacci retracement level (based on the entire 1998-2011 declines).

Having said that, let’s focus on the daily chart and look for more clues about future moves.

Although there have been several attempts to invalidate the breakdown under the green line, they all failed. Yesterday, currency bulls climbed to this key resistance once again, but as you see on the daily chart the green line is still in play and keeps gains in check. Taking this fact into account, and combining it with sell signals generated by the CCI and Stochastic Oscillator, we think that further deterioration is just around the corner. If this is the case, and USD/JPY moves lower from here, the initial downside target would be the previously-broken red declining support line (currently around 119.36). If it is broken, we might see a decline even to 118.71-118.85, where the bottom of the previous pullback is. At this point is it worth noting that slightly below this area is also the green support zone, which stopped declines in mid-Feb and the end of March.

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

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

The situation in the medium-term perspective hasn’t changed much as USD/CHF still remains above the long-term red support line. Today, we’ll take a closer look at the daily chart.

Quoting our last commentary on this currency pair:

(…) USD/CHF extended gains (…), buy signals generated by the indicators remain in play, which suggests that we’ll likely see an attempt to come back above the orange resistance line (currently around 0.9900) in the coming days.

Looking at the daily chart, we see that the situation developed in line with the above scenario and USD/CHF climbed to the orange line. Yesterday, this resistance triggered a pullback, which in combination with sell signals generated by the CCI and Stochastic Oscillator suggests that lower values of the exchange rate in the coming days should not surprise us.

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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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