Earlier today, the ADP report showed that non-farm private employment increased by 214,000 last month, beating expectations for an increase of 190,000. Thanks to these solid numbers, the USD Index extended gains and hit an intraday high of 98.59. How did this increase affect the euro, yen and Swiss franc?

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

• EUR/USD: short (stop-loss order at 1.1512; initial downside target at 1.0572)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Yesterday, we wrote the following:

(…) the pair (…) reached the 61.8% Fibonacci retracement. Although EUR/USD could rebound from here, yesterday’s verification of the breakdown under the lower border of the green rising trend channel in combination with sell signals generated by the weekly indicators suggests that further deterioration is just around the corner. Therefore, if this support level is broken, we may see a decline to around 1.0814, where the previously-broken long-term red declining line (marked on the weekly chart) is.

Looking at the charts, we see that EUR/USD extended losses and broke below the 61.8% Fibonacci retracement, approaching our next downside target. If this support is broken, the next downside target would be around 1.0784 (the 70.7% retracement) or we’ll see a drop even to around 1.0709-1.0752, where the Jan lows and two important Fibonacci retracement levels (76.4% and 78.6%) are.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.1512 and the initial downside target at 1.0572) 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

On the daily chart, we see that USD/JPY reversed and rebounded, approaching the orange resistance zone created by the previous highs and the 38.2% Fibonacci retracement. As you see, this area encouraged currency bears to act, which in combination with a sell signal generated by the Stochastic Oscillator suggests further deterioration. If this is the case, and USD/JPY declines from here, we may see a test of the recent lows in the coming days.

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

Quoting our last commentary on this currency pair:

(…) USD/CHF reached our next upside target [the previously-broken blue resistance line] earlier today. With this upward move, the pair also climbed to the 6.8% Fibonacci retracement, which could result in a reversal – similarly to what we saw in the previous week.

From today’s point of view, we see that USD/CHF gave up some gains as we had expected. As you see, the exchange rate is currently consolidating between the 50% Fibonacci retracement and the blue resistance line, which suggests that as long as there is no breakout above the Monday’s high or a breakdown below the lower line of the formation, another bigger move is not likely to be seen. Nevertheless, the position of the CCI and Stochastic Oscillator suggests that currency bears will try to push the pair lower in the coming days.

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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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