Earlier today, the USD Index came back above the barrier of 100. What impact did this move have on the euro, pound and yen?

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

• EUR/USD: short (a stop-loss order at 1.1180; downside target at 1.0568)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: long (a stop-loss order at 0.9664; upside target at 1.0237)
• AUD/USD: none

EUR/USD

On the daily chart, we see that although EUR/USD moved higher earlier today, currency bulls didn’t manage to push the pair to the green zone (not to mention a breakout above it), which resulted in a reversal and decline. Such price action doesn’t bode well for improvement and means that what we wrote yesterday remains up-to-date:

(…) EUR/USD not only slipped to our Friday’s target, but also declined below it (…), which is a negative signal that suggests further deterioration and a test of the 88.6% Fibonacci retracement in the coming day(s).

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 (already profitable) 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 the daily chart, we see that GBP/USD extended losses earlier today, which means that our previous commentary on this currency pair is still valid:

(…) the exchange rate not only reached our upside targets, but also climbed to the previously-broken lower border of the red declining trend channel (marked on the weekly chart). Taking these facts into account and combining them with the current position of the daily indicators (the RSI reversed, the CCI generated a sell signal, while the Stochastic Oscillator is very close to doing the same), we think that lower values of GBP/USD are very likely in the coming days. Therefore, if the pair declines from here, the initial downside target would be the previously-broken upper border of the blue consolidation and the lower border of the purple declining trend channel (marked on the daily chart) around 1.2315-1.2365.

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
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/JPY

As you see on the very short-term chart USD/JPY closed yesterday’s session above the Jul highs, which triggered further improvement earlier today. Such price action suggests that our yesterday’s assumptions are up-to-date also today:

(…) the pair also climbed above the red resistance line (based on the March highs) and the Jul high, which suggests that we may see a rally even to the red bold resistance line (based on the Feb and March highs) around 109.55 in the coming week (this area is also reinforced by the 127.2% Fibonacci extension based on the Jul-Aug downward move and the 38.2% Fibonacci retracement based on the entire 2015-016 downward move, which increases the probability of reversal in this zone).

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