In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- 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
Yesterday, we wrote the following:
(…) EUR/USD moved sharply higher and broke above two important resistance lines – the upper border of the brown rising trend channel and the long-term red declining resistance line. This (…) suggests further improvement and a test of the 61.8% Fibonacci retracement based on the May 2016-January 2017 downward move (around 1.1127).
From the weekly perspective, we see that currency bulls pushed EUR/USD higher and the exchange rate almost touched our upside target. With today’s increase, the pair also reached the 161.8% Fibonacci extension seen on the daily chart below.
Additionally, the current position of the daily and weekly indicators suggests that reversal and lower values of EUR/USD are just around the corner.
Very short-term outlook: mixed
Short-term outlook: mixed with bearish bias
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.
GBP/USD
Looking at the daily chart, 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, we can notice a potential head-and-shoulders formation, which means that as long as there is no invalidation of this bearish formation, another downswing is very likely.
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 continues to keep gains in check. 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 even 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 although AUD/USD extended gains on Monday, the pair stuck in the blue consolidation in the following days. This means that as long as there is no breakout above the upper border of the formation (or a breakdown under the lower line) another bigger move to the upside/downside is not likely to be seen and short-lived moves in both directions should not surprise us. Nevertheless, the current position of the weekly indicators suggests that even if the pair moves a bit lower, the next bigger move will be to the upside.
Very short-term outlook: mixed
Short-term outlook: mixed with bullish bias
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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