currency and forex trading

nadia-simmons

Forex Trading Alert: GBP/USD - More Weakness on the Way?

March 16, 2016, 9:35 AM Nadia Simmons

Although today’s official data showed that Britain’s unemployment rate remained steady at 5.1% and the claimant count (it measures the change in the number of unemployed people in the U.K.) dropped by 18,000 in the previous month, GBP/USD is still under pressure as uncertainty over Britain’s future in the euro zone continued to weigh on investors’ sentiment. How low could the pair go in the coming days?

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

EUR/USD

EUR/USD - the weekly chart

EUR/USD - the weekly chart

As you see on the above charts, the overall situation in EUR/USD hasn’t changed much since yesterday as the exchange rate is still trading in the blue consolidation under the previously-broken green support/resistance line. Therefore, our Monday’s commentary on this pair is up-to-date:

(…) similar price action in mid-Feb triggered further deterioration and a test of the red declining line, which suggests that we may see similar drop in the coming days.

(…) the exchange rate remains in the blue consolidation, which suggests that a breakdown under the lower line of the formation (or a breakout above the upper line) will indicate the direction of another move. Nevertheless, taking into account the medium-term picture and the current position of daily indicators (the CCI and Stochastic Oscillator are very close to generating sell signals), we think that anther downswing is just a matter of time. Therefore, in our opinion, we’ll see a test of the green horizontal support line (based on the mid-Dec high) and the lower border of the green rising trend channel in the coming days.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.1512 and the initial downside target at 1.0572) 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

GBP/USD - the weekly chart

GBP/USD - the daily chart

On Monday, we wrote the following:

(…) an increase to the 70.7% retracement (…) approached the pair t the previously-broken lower border of the purple rising trends channel. Additionally, when we take a closer look at the chart, we clearly see that the CCI and Stochastic Oscillator are overbought, which suggests that reversal and lower values of the exchange rate should not surprise us in the coming days. On top of that, if GBP/USD declines under 1.4327, we’ll see an invalidation of the breakout above the 23.6% Fibonacci retracement (based on the entire mid-Jun-Feb downward move and marked on the chart below), which would be an additional negative signal, which could encourage currency bears to act.

Looking at the chart, we see that the situation developed in line with the above scenario and GBP/USD moved lower. With this downswing, the exchange rate not only invalidated earlier breakout above the 23.6% Fibonacci retracement, but also above the pink declining support/resistance line. Taking all the above into account and combining it with sell signals generated by the indicators, we think that further deterioration is more likely than not. Therefore, if the pair declines under the red horizontal support line, we’ll see a drop to around 1.3965-1.3976, where the 76.4% and 78.6% Fibonacci retracement levels are.

Very short-term outlook: bearish
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

AUD/USD - the weekly chart

AUD/USD - the daily chart

On the above charts, we see that AUD/USD extended losses and invalidated earlier breakout above the upper border of the blue consolidation, which is a negative signal that suggests further deterioration. Nevertheless, we believe that what we wrote on Monday remains up-to-date:

(…) AUD/USD gave up some gains earlier today, which resulted in a drop under the upper border of the purple rising trend channel. In this way, the pair invalidated earlier small breakout, which is a negative signal. Nevertheless, (…), we think that further deterioration would be more reliable if the exchange rate drops under the lower border of the blue consolidation marked on the daily chart (at 0.7408)

Please note that if we see such price action, we’ll consider opening short positions.

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.

Thank you.

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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts

Did you enjoy the article? Share it with the others!

Gold Alerts

More

Dear Sunshine Profits,

gold and silver investors
menu subelement hover background