Earlier today, data showed that the Markit’s construction PMI dropped to 57.1 from 58.1 June, missing economists’ expectations for a rise to 58.4. Thanks to these disappointing numbers, GBP/USD moved lower and approached the short-term support line. Will it stop currency bears?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
The medium-term picture hasn’t changed much as EUR/USD is still trading under the previously-broken long-term red declining resistance line.
Will the very short-term picture give us more clues about future moves? Let’s examine the daily chart and find out.
Looking at the daily chart we see that although EUR/USD moved little higher earlier today, the pair remains under the previously-broken upper border of the blue declining trend channel, which suggests that another downswing can’t be ruled out. Nevertheless, taking into account buy signal generated by the Stochastic Oscillator it seems that currency bulls will try to push the exchange rate above this resistance line in the coming day(s). If they succeed, and we see a daily close above it (!), we may see further improvement and an increase to the 50-day moving average (currently around 1.1036). On the other hand, another daily closure below the blue resistance line will increase the probability of further declines.
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
The situation in the medium term remains almost unchanged as GBP/USD is trading between the last week’s high and low. Today, we’ll focus on the very short-term picture.
From this perspective we see that GBP/USD is trading in the consolidation (marked with blue) slightly above the lower border of the blue rising trend channel. This means that a breakout/breakdown will indicate the direction of future moves. Where will the pair head next? Taking into account only the current position of the indicators (sell signals remain in place), it seems that further deterioration is just around the corner. Nevertheless, acceleration of declines will be more likely (and reliable) if we see a daily close under the lower border of the trend channel. In this case, the next downside target would be around 1.1546, where the Jul 24 low is.
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
Although USD/CHF moved little lower earlier this week, the exchange rate remains above the 100% Fibonacci price projection (marked with blue), which serves as support.
What can we infer from the very short-term picture? Let’s examine the daily chart and find out.
In our previous commentary on this currency pair, we wrote the following:
(…) the pair rebounded, invalidating small breakdown under the blue line (…). Additionally, (…) USD/CHF broke above the Jul high, which suggests further improvement and a test of the 61.8% Fibonacci retracement in the coming days.
From today’s point of view we see that the situation developed in line with the above scenario and the exchange rate reached our upside target on Thursday. As you see on the daily chart, this resistance level triggered a decline, which took the pair to the lower border of the rising trend channel.
Despite this sharp drop, currency bulls didn’t give up and USD/CHF re-approached the 61.8% Fibonacci retracement. What’s next? The current position of the indicators suggests that the next move will be to the downside. However, such price action will be more likely if we see sell signals in the coming days. Until this time, another test of the resistance level can’t be ruled out.
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 at the moment. 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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