Earlier today, the British pound moved lower against the greenback after reports of a possible push for fresh Scottish independence vote. Thanks to these circumstances, GBP/USD slipped below the lower border of a triangle and reached the first support area. Will it manage to stop currency bears in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.0735; the initial downside target at 1.0388)
• GBP/USD: none
• USD/JPY: long (a stop-loss order at 111; the initial upside target at 115.43)
• USD/CAD: long (a stop-loss order at 1.2949; the initial upside target at 1.3302)
• USD/CHF: long (a stop-loss order at 0.9891; the initial upside target at 1.0180)
• AUD/USD: none

EUR/USD

Looking at the above charts, we see that the overall situation hasn’t changed much as EUR/USD is still trading in the blue declining trend channel. Earlier today, the pair climb to the upper border of the blue declining trend channel once again, which suggests that another reversal is just around the corner. If this is the case, we’ll likely see a drop to around 1.0460 (the 76.4% and 78.6% Fibonacci retracements) or even to the lower border of the blue tend channel in the coming week.

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

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.0735 and the initial downside target at 1.0388 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

On the weekly chart, we see that although GBP/USD moved higher in the previous week, currency bulls didn’t manage to hold gained levels, which resulted in a pullback. How did this drop affect the very short-term picture? Let’s take a closer look at the daily chart below and find out.

From this perspective, we see that although GBP/USD increased above the upper border of the blue triangle, the yellow resistance zone (created by the February 9, 14 and 23 highs) stopped further improvement, triggering a downswing. As a result, the exchange rate came back to the triangle and invalidated the earlier breakout above the upper line of the formation. This negative event encouraged currency bears to act earlier today, which resulted in a drop under the lower line. Such decline suggests further deterioration and a drop to around 1.2219 in the coming days. However, in our opinion such price action will be more likely and reliable if GBP/USD closes the day below the green support zone created by the previous lows.

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.

USD/CAD

On Friday, we wrote the following:

(…) the resistance area created by the February 7 high and the 38.2% Fibonacci retracement encouraged currency bears to act, which resulted in a pullback to the previously-broken orange declining line, which serves now as a support. Such decline looks like a verification of the breakout and suggests that another reversal is just around the corner – especially when we factor in the proximity to the long-term blue support line, which stopped currency bears and triggered an upward move several times in the past.

Looking at the daily chart, we see that the situation developed in line with the above scenario and USD/CAD moved higher in the previous days. Additionally, the Stochastic Oscillator is very close to re-generate a buy signal, which suggests higher values of the exchange rate in the coming days. If the pair moves higher from current levels, the initial upside target will be the resistance area created by the February 7 high and the 38.2% Fibonacci retracement.

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

Trading position (short-term; our opinion): Long positions (with a stop-loss order at 1.3055 and the initial upside target at 1.3302) 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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