Earlier today, the U.S. dollar moved higher against major currencies after data showed that U.S. pending home sales rose for the first time in nine months in March. The currency exchange rates that together create the USD Index contributed in different ways. One of them even currently provides a trading opportunity in our view. Which one? Let’s take a closer look.

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

• EUR/USD: none
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (stop-loss order: 0.9410; initial price target: 0.9060)

EUR/USD

In our Forex Trading Alert posted on Tuesday, we wrote the following:

(…) If the proximity to the previously-broken long-term declining line encourages buyers to act, we will likely see an increase to the upper border of the consolidation (at 1.3905). However, if this important support line is broken, we may see a drop to the lower border of the rising trend channel (..)

Looking at the weekly chart, we see that the buyers used the proximity to the major support line and pushed EUR/USD higher in the previous week. Earlier today, the exchange rate extended gains and hit a 2-week high of 1.3879. Despite this improvement, the situation in the medium term hasn’t changed much as the pair still remains in a consolidation (marked with light blue). Please keep in mind that the nearest resistance is still around 1.3905, where the upper line of the consolidation is.

Once we know the above, let’s take a look at the daily chart.

As you see on the above chart, EUR/USD moved higher and broke above the resistance zone created by the Apr.17 and Apr.23 highs earlier today. Despite this improvement, the buyers didn’t manage to hold gained levels and the pair declined, invalidating the breakout, which is a bearish signal. Therefore, if the pair closes the day below this resistance area, we may see a pullback to an intraday low of 1.3814 or even to the 50-day moving average (currently around 1.3794). Nevertheless, if the buyers push the order button once again and push the pair above today’s high, we will likely see another attempt to reach the April high.

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

Trading position: In 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

From the weekly perspective, we see that the situation hasn’t changed much. Although GBP/USD extended gains and hit a fresh 2014 high, the pair reversed and declined, invalidating the breakout above the previous high. This is a bearish signal – especially when we factor in the proximity to the strong resistance zone created by Aug. and Nov. 2009 highs and the current position of the indicators (the CCI and Stochastic Oscillator are overbought). Taking these circumstances into account, another attempt to move lower should not surprise us.

Let’s take a closer look at the daily chart.

In our last Forex Trading Alert, we wrote the following:

(…) GBP/USD remains between the green medium-term support line and the resistance level (created by the annual high). Taking into account the fact that the space between these two lines narrows, we will likely see a breakout above the 2014 high (or a breakdown below the major support line) in the nearest future, which will trigger another sizable move.

As you see on the above chart, we noticed both price actions earlier today (a drop below the medium-term support line and an increase above the 2014 high. However, none of these moves didn’t trigger another sizable downswing/upswing so far, which makes the very short-term outlook unclear.

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

Trading position (short-term): Earlier today, the pair moved above our stop-loss level, which closed short positions. Taking into account the fact that the current situation is unclear, in 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. At this time, it seems that we will see another shorting opportunity shortly (as soon as the recent short-term breakout is invalidated) – again, we’ll keep you informed.

USD/JPY

On the weekly chart, we see that although USD/JPY declined in the previous week, the pair still remains above both green lines, which serve as major support.

Let’s take a look at the daily chart.

Looking at the above chart, we see that the sellers realized their bearish scenario (we wrote about it here) on Friday as USD/JPY declined to the upper green line. As you see on the daily chart, this support encouraged buyers to act and triggered a sharp corrective upswing earlier today. In this way, the exchange rate approached the recent highs. If this resistance area holds, we may see another test of the strength of the green line. However, if it is broken, the next upside target for the buyers will be the 61.8% Fibonacci retracement based on the entire April decline (around 103).

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

Trading position (short-term): In 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/CAD

From the weekly perspective, we see that although USD/CAD moved higher in the previous weeks, the pair didn’t even erased 50% of earlier losses. The size of the corrective upswing is still quite small, which suggests that another attempt to move lower can’t be ruled out.

Let’s move on to the daily chart.

Looking at the above chart, we see that although there were several attempts to break above the upper line of the consolidation (created by the Apr.16 high) in the previous week, they all failed. Earlier today, we saw another try to move higher, but the buyers disappointed and USD/CAD came back to the consolidation range once again. Taking these facts into account and combining with the current position of the indicators (sell signals generated by the CCI and Stochastic Oscillator remain in place), it seems that a correction in the coming days should not surprise us. If this is the case, we will likely see a pullback to around 1.0982 (the April 17 low) or even to 1.0958, where the lower border of the consolidation is.

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

Trading position (short-term): In 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/CHF

In our Forex Trading Alert posted on Wednesday, we wrote the following:

(…) If the proximity to the upper border of the declining wedge encourages sellers to act, we may see further deterioration and a drop to the lower line of the declining trend channel (marked with brown) – currently around 0.8800.

Looking at the weekly chart, we see that USD/CHF declined to the above-mentioned downside target on Friday. Earlier today, the pair moved lower and broke below the lower line of the declining trend channel. Although the exchange rate rebounded, USD/CHF is still trading below 0.8800 (at least at the moment when these words are written). If the pair doesn’t come back above the brown resistance line in the coming days, we will likely see further deterioration and a drop to the monthly low.

Once we know the above, let’s take a closer look at the daily chart.

Quoting our Forex Trading Alert posted on Thursday:

(…) taking into account sell signals generated by the CCI and Stochastic Oscillator, it seems that the sellers will likely try to push the pair lower in the near future. In this case, we may see a decline to the Apr.17 low or even to the monthly low of 0.8742.

As you see on the above chart, USD/CHF extended losses and reached the first downside target earlier today. Although the pair rebounded in the following hours, the exchange rate still remains below the very short-term green line and the lower border of the rising trend channel, which together create the nearest resistance zone. From this perspective, it seems that as long as we won’t see a breakout above this area, another attempt to move lower should not surprise us.

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

Trading position (short-term): In 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.

AUD/USD

Looking at the weekly chart, we see that AUD/USD extended losses and dropped below the lower border of the consolidation once again. Therefore, what we wrote in our Forex Trading Alert posted on Thursday is up-to-date.

(…) the situation has deteriorated as AUD/USD slipped (…) below the lower border of the consolidation range. If the buyers do not manage to push the pair above this line, we may see further deterioration and a drop to around 0.9046 (at this level the size of the downswing corresponds to the height of the consolidation range). Please keep in mind that sell signals generated by the CCI and Stochastic Oscillator remain in place, supporting the bearish case.

Once we know the medium-term situation, let’s move on to the daily chart.

Quoting our last Forex Trading Alert:

(…) AUD/USD rebounded and climbed above the lower declining red resistance line and the upper border of the blue rising trend channel. (…) if the buyers do not give up and push the pair above yesterday’s high, we may see an increase even to around 0.9335, where the upper line of the declining trend channel (marked with red) is.

On the above chart, we see that the buyers realized the above-mentioned pro growth scenario earlier today. Despite this improvement, they didn’t manage to push the exchange rate above the resistance line, which encouraged sellers to act and triggered a correction. With this downswing, AUD/USD declined not only below the upper border of the blue rising trend channel and the lower declining red resistance line, but also dropped under the previous week’s low. Taking these bearish facts into account, we will likely see further deterioration in the near future and the next downside target for the sellers will be around 0.9204, where the Apr.3 low is.

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

Trading position (short-term): Short. Stop-loss order: 0.9410 and initial price target: the lower border of the blue rising trend channel (currently at 0.9060). 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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