The USD Index is currently trading at yesterday’s levels as investors remain on the sidelines, awaiting the outcome of a U.S. presidential vote. What the euro, Canadian dollar and Swiss franc can tell us about the greenback’s future moves?
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 (a stop-loss order at 0.7769; initial downside target at 0.7542)
EUR/USD
On the weekly chart we see that EUR/USD remains under the blue dashed support/resistance line, which means that an invalidation of earlier breakout above this line and its negative impact on the exchange rate is still in effect, suggesting further deterioration in the coming.
How did this drop affect the very short-term picture? Let’s check.
On Thursday, we wrote:
(…) EUR/USD reversed and declined after an increase to the yellow resistance zone. Taking this fact into account and combining it with the current position of daily indicators (…) (sell signals), we think that further deterioration is just around the corner.
On the daily chart, we see that the situation developed in line with the above scenario and EUR/USD slipped below the orange support zone, which suggests further deterioration – especially when we factor in the medium-term picture and sell signals generated by the indicators. If this is the case and the pair declines from here, the initial downside target would be around 1.1000 (the lower border of the purple declining trend channel and late-Oct highs). If this area is broken, we’ll likely see a test of the grey (or even green) support zone in the following days.
Very short-term outlook: mixed with bearish bias
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. Nevertheless, we're considering opening short positions. As always we will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
On the weekly chart, we see that the overall situation hasn’t changed much as USD/CAD remains slightly above the previously-broken upper border of the purlpe rising wedge. Nevertheless, the current levels of the CCI and Stochastic Oscillator suggest that reversal is just around the corner.
Having said the above, let’s check the very short-term picture.
Looking at the daily chart, we see that although USD/CAD broke above the upper border of the purple rising wedge and the upper line of the blue rising trend channel on Friday (invalidating earlier breakdowns under these lines), this improvement was only temporary and the exchange rate came back below both lines, which in combination with sell signals generated by the indicators suggests another attempt to move lower and a test of the orange zone, which serves now as the nearest support. If currency bears manage to push the pair below it, the next target would be around 1.3195, where the 38.2% Fibonacci retracement (based on the Aug-Nov upward move) 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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above./p>
USD/CHF
The situation in the medium term hasn’t changed much as USD/CHF remains in the blue consolidation under the key resistance zone (created by the long-term red declining resistance line based on the Nov and Feb highs, the green rising line based on the May and Aug 2015 lows and May and Jul highs). Today, we’ll focus on the very short-term changes.
From today’s point of view, we see that although USD/CHF declined sharply under the green support line on Friday, currency bulls didn’t give up and invalidated this breakdown quite quickly. Yesterday (and also earlier today), the pair verified breakout above the green line, which in combination with buy signals generated by the indicators suggests further improvement in the coming days. If we see such price action, USD/CHF could even re-test the yellow resistance zone later this week.
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. However, we're considering opening long positions. As always, 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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