Earlier today, the euro extended gains against the greenback, but did this increase change the short-term picture of the exchange rate?

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

• EUR/USD: short (a stop-loss order at 1.1052; the initial downside target at 1.0521)
• GBP/USD: short (a stop-loss order at 1.3087; the initial downside target at 1.2602)
• USD/JPY: long (a stop-loss order at 107.62; the initial upside target at 111.16)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the daily chart, we see that although EUR/USD extended gains earlier today, the pair remains under the previously-broken upper border of the brown rising trend channel and the long-term red declining resistance line (both marked on the weekly chart). Additionally, the current upswing looks like a verification of the earlier breakdown under both lines, which doesn’t bode well for further rally. If this is the case, EUR/USD will reverse and decline in the very near future.

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 1.1052 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

From today’s point of view, we see that GBP/USD moved a bit higher and increased slightly above the upper border of the brown rising trend channel earlier today. Despite this improvement, currency bulls didn’t manage to hold these levels, which resulted in a pullback. Thanks to this drop the pair invalidated this tiny breakout, which suggests further deterioration in the coming week. This scenario is also reinforced by the medium-term picture.

On the weekly chart, we see that although the exchange rate increased, the upper border of the red declining trend channel stopped currency bulls once again. Additionally, the CCI and the Stochastic Oscillator are very close to generating sell signals, which increases the probability of further declines in the coming week(s).

Connecting the dots, if GBP/USD extends losses, the first downside target will be around 1.2749-1.2755, where the late April lows and the 23.6% Fibonacci retracement (based on the entire January-May upward move) are. Nevertheless, taking into account the current position of the weekly indicators, we think that the exchange rate will move lower in the following weeks.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3087 and the initial downside target at 1.2602) 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

Looking at the daily chart, we see that the lower border of the red declining trend channel together with the 70.7% Fibonacci retracement encouraged currency bulls to act. As a result, AUD/USD moved higher in recent days, which in combination with the buy signals generated by the indicators suggest further improvement and the test of the upper border of the trend channel in the following days. Additionally, in this area is also the 38.2% Fibonacci retracement (based on the entire downward move), which increases the probability of reversal around 0.7487.

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. 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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