Although the USD Index extended gains after the Commerce Department report (which showed that housing starts rose 0.2% to the highest level since October 2007) and climbed above 97 yesterday, the uncertainty around today’s minutes of the Fed’s July meeting pushed the greenback lower earlier today. What impact did this move have on EUR/USD, GBP/USD and USD/CAD?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
The situation in the medium term hasn’t changed much as EUR/USD remains above the previously-broken long-term red declining resistance line. Today, we’ll focus on the very short-term changes.
On Monday, we wrote:
(…) EUR/USD moved lower, breaking under the orange support area. This negative sign, which in combination with sell signals generated by the indicators, suggests that the pair will likely test the lower border of the blue consolidation in the coming day(s).
From today’s point of view we see that the situation developed in line with the above scenario and EUR/USD reached our initial downside target. As you see, the lower line of the consolidation triggered an upswing, which suggests a test of the previously-broken orange support/resistance area. Nevertheless, taking into account the current position of the indicators (sell signals remain in place supporting currency bears), we think that lower values of the exchange rate are still ahead us. If this is the case, and the pair reverses, the next downside target would be the psychological barrier of 1.1000 or even the red declining line (currently around 1.0970).
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
Looking at the above charts, we see that GBP/USD is still trading slightly below the upper border of the blue consolidation (marked on the weekly chart), the orange resistance zone and the previously-broken blue line. Taking into account this solid resistance area and combining it with sell signal generated by the Stochastic Oscillator, it seems that the next move will be to the downside. In this case, the initial target for currency bears would be the green support line (currently around 1.5512). Nevertheless, if the pair manages to close the day above these resistance levels, it would be a bullish signal, which could trigger a rally to the next orange resistance zone around 1.5786-1.5800 (the 76.4% and 78.6% Fibonacci retracement levels based on the Jun-Jul decline).
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
From this perspective, we see that USD/CAD moved lower and invalidated earlier breakout above the 2008 high once again. What impact did this move have on the very short-term picture? Let’s take a closer look at the daily chart and find out.
On the daily chart, we see that although USD/CAD climbed to the previously-broken green line on Monday, currency bulls didn’t manage to push the pair higher. In this way, the exchange rate closed another day under this key resistance, which was a negative signal that triggered a decline. Taking the above into account, and combining it with the medium-term picture, it seems to us that USD/CAD will test the lower border of the blue consolidation in the coming day(s).
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed with bearish bias
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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