Although today’s official data showed that the U.K. GDP in the third quarter (a preliminary reading) increased in line with analysts’ forecasts, GBP/USD erased almost all earlier gains and remains at yesterday’s levels. What’s next for the exchange rate?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Quoting our previous alert:
(…) EUR/USD declined and reached the Nov 2015 low, which could stop further deterioration – especially when we factor in buy signals generated by the CCI and Stochastic Oscillator. Nevertheless, even if this support level fails, the space for drops seems limited as March and Apr 2015 lows (the lower border of the green support zone marked on the weekly chart) are quite close to current levels.
From today’s point of view, we see that the combination of the above-mentioned factors encouraged currency bulls to act and EUR/USD moved little higher earlier today. Additionally, buy signals generated by the indicators remain in place, suggesting another attempt to move higher. If this is the case and the exchange rate extends gains, the initial upside target would be around 1.0702, where the 23.6% Fibonacci retracement (based on the recent downward move) is. Nevertheless, in our opinion, further improvement will be more likely if the pair climbs above the Wednesday’s high.
Very short-term outlook: mixed with bullish 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
Looking at the daily chart, we see that the situation hasn’t changed much since Monday as GBP/USD remains in the green consolidation, which suggests that a breakout above the upper line of the formation (or a breakdown below the lower line) will indicate the direction of another move. Which scenario is more likely? As you see on the chart, the exchange rate verified earlier breakout above the lower purple line and bounced off the 61.8% Fibonacci retracement, which in combination with buy signals generated by the indicators favors currency bulls and another attempt to move higher. If this is the case, our upside target from the previous commentary on this currency pair would be in play:
(…) the CCI and Stochastic Oscillator generated buy signals, which suggests further improvement and a test of the previously-broken lower border of the red declining trend channel (marked on the weekly chart) in the coming days.
Very short-term outlook: mixed wit bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
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.
USD/CHF
On the weekly chart, we see that the overall situation hasn’t changed much as USD/CHF remains above the previously-broken green line.
Will the very short-term chart give us more clues about future moves? Let’s check.
The first thing that catches the eye on the daily chart is a breakout above the upper border of the blue consolidation. Despite this positive event currency bulls pushed the exchange rate only to the area where the size of the upward move corresponded to the height of the formation, which encouraged their opponents to act. As a result, USD/CHF gave up some gains earlier today, which resulted in a comeback to the previously-broken upper line of the blue consolidation. On one hand, such price action could be a verification of earlier breakout, which may translate into another rebound. On the other hand, we should keep in mind that all indicators generated sell signals, suggesting further deterioration in the coming days. Nevertheless, in our opinion, lower values of the exchange rate would be more reliable if we see an invalidation of a breakout above the upper border of the grey rising trend channel. In this case, he initial downside target would be the yellow zone, which serves now as support.
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 Fund Manager
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