Earlier today, GBP/USD moved lower once again as concerns about the impact on the British economy after its exit from the European Union continued to weigh on investors’ sentiment. Will we see a test of 1.2000 in the coming week?

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

• EUR/USD: none
• GBP/USD: short (a stop-loss order at 1.3549 and initial downside target at 1.2231)
• USD/JPY: none
• USD/CAD: short (a stop-loss order at 1.3346; initial downside target at 1.2876)
• USD/CHF: none
• AUD/USD: short (a stop-loss order at 0.7791; initial downside target at 0.7516)

EUR/USD

Although EUR/USD moved lower, the situation in the medium term hasn’t changed much as the exchange rate remains in a consolidation between the Sep high and low.

Will the very short-term chart give us more clues about future moves? Let’s check.

Looking at the daily chart we see that EUR/USD reversed and declined earlier today, which resulted in a verification of the breakdown under the lower border of the blue consolidation. This suggests a re-test of the green support zone or even the Friday’s low in the coming day(s). Nevertheless, we still believe that as long as there won’t be a breakout above the orange declining resistance line or a successful breakdown under the green zone (confirmed by a daily closure) another bigger move to the upside or downside is not likely to be seen and short-lived moves in both directions should not surprise us.

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.

GBP/USD

On Tuesday, we wrote the following:

(…) If the pair extends losses, the initial downside target would be around 1.2231, where the size of the downward move will correspond to the height of the consolidation. If this level is broken, we may see a decline even to around 1.2163, where the size of a drop corresponds to the height of the red trend channel.

From today’s point of view, we see that the situation developed in line with the above scenario and GBP/USD reached our downside targets. What’s next? Although the pair rebounded on Friday, we think that this upswing was just a verification of the breakdown under the lower border of the purple declining trend channel. If this is the case, the exchange rate will move lower once again and re-test the Friday low or even slip to around the barrier of 1.2000 in the coming week. If we see such price action, we’ll consider closing short positions. As always, we’ll keep you - our subscribers - informed should anything change.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3549 and initial downside target at 1.2231) 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 the long-term chart, we see that although USD/CAD broke above the upper border of the blue consolidation, currency bulls didn’t manage to push the pair higher, which resulted in a pullback. With this move the exchange rate came back to the consolidation and invalidated earlier breakdown, which suggests further deterioration.

How did this price action affect the very short-term chart? Let’s check.

On the daily chart, we see that although USD/CAD increased sharply on Friday, the orange resistance zone in combination with the upper border of the brown rising wedge and sell signals generated by the indictors encouraged currency bears to act earlier today. As a result, the pair declined sharply and invalidated the breakout above the upper border of the blue rising trend channel once again, which suggests that further deterioration is just around the corner. If this is the case and USD/CAD moves lower from current levels, the initial downside target would be the lower border of the brown rising wedge. If this support is broken, the next downside target would be around 1.3027-1.3046, where the previous lows and the 50% Fibonacci retracement are.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3346 and initial downside target at 1.2876) 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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