Although GBP/USD moved sharply higher and climbed to the highest levels this year, uncertainty around Brexit vote weighed on investors’ sentiment and pushed the pair little lower yesterday. Which way next for GBP/USD?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
On the weekly chart, we see that EUR/USD declined and invalidated earlier breakout above the blue line and the red horizontal line. At the beginning of the month, similar situation triggered further deterioration, which approached the pair to the brown support line. This suggests that we may see similar price action in the coming week.
Are there any other factors that could encourage currency bears to act? Let’s examine the daily chart and find out.
Yesterday, EUR/USD declined sharply and invalidated earlier breakout above the upper border of the consolidation, which is a bearish signal. Although the exchange rate rebounded slightly earlier today, invalidation of the breakout and its negative consequences are still in effect, which in combination with a sell signal generated by the Stochastic Oscillator and the medium-term picture suggest another attempt to move lower . If this is the case, EUR/USD will likely slip under the lower border of the consolidation and test the brown support line 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.
GBP/USD
Quoting our Monday’s alert:
(…) GBP/USD climbed to the orange resistance zone once again, which suggests that we may see another reversal in the coming days – similarly to what we saw in previous weeks. Nevertheless, before we see such price action, another attempt to move higher and a re-test of recent highs can’t be ruled out as buy signals are still in play.
From today’s point of view, we see that currency bulls pushed the pair higher, which resulted in a breakout above the purple resistance line, previous peaks and a climb to the highest level since Jan 3. Despite this improvement, currency bulls didn’t manage to hold gained levels, which triggered a pullback yesterday. With this move, GBP/USD invalidated earlier breakout above the purple line and previous peaks, which is a negative signal that suggests further deterioration – especially when we factor in the current situation in the indicators (the CCI and Stochastic Oscillator are overbought and very close to generating sell signals). Nevertheless, in our opinion, lower values of the exchange rate will be more likely and reliable if GBP/USD drops under the orange zone (marked on the daily chart).
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/CHF
Looking at the daily chart, we see that the overall situation hasn’t changed much since Monday, which means that our last commentary on this currency pair is up-to-date:
(…) What’s next? Taking into account the fact that the exchange rate remains in a blue consolidation, we think that as long as there won’t be breakdown under the lower line of the formation (or a breakout above the upper border), another bigger move is not likely to be seen.
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. 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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