Earlier today, the U.S. Department of Labor reported that the number of initial jobless claims in the week ending February 13 decreased by 7,000 to a 12-week low of 262,000, beating analysts’ forecasts. Additionally, the Federal Reserve Bank of Philadelphia showed that its manufacturing index improved to -2.8 this month, which supported the greenback. What impact did it have on the euro, pound and yen?

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: long (stop-loss order at 0.9633; initial downside target at 1.0239)
• AUD/USD: none

EUR/USD

On the daily chart, we see that EUR/USD extended losses and dropped under the previously-broken navy blue support line, invalidating earlier breakout. This is a negative signal, which suggests that what we wrote on Tuesday is up-to-date:

(…) we believe that as long as the exchange rate remains under the key resistance lines (red declining line based on the Apr, Jul and Aug lows and marked on the weekly chart and the upper border of the green rising trend channel) another attempt to move lower is more likely than not. (…) in our opinion, an acceleration of declines will be more likely and reliable after a breakdown under the navy blue support line. In this case, the pair will test the lower border of the green rising trend channel in the following days.

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.

GBP/USD

Quoting our last commentary on this currency pair:

(…) although GBP/USD moved higher and came back above the previously-broken upper border of the purple rising trend channel and the blue resistance line currency bulls didn’t manage to hold gained levels, which resulted in an invalidation of earlier small breakouts. This negative signal in combination with a sell signal generated by the Stochastic Oscillator triggered further deterioration, which suggests that we’ll see a test of the lower border of the purple rising trend channel in the coming days.

Looking at the daily chart, we see that the situation developed in line with the above scenario and the pair slipped slightly below our downside target. Despite this drop, currency bulls pushed the exchange rate higher, which resulted in an invalidation of the breakdown under the lower border of the purple rising trend channel. Taking this positive signal and the current position of the indicators into account we think that another upswing should not surprise us. If this is the case and GBP/USD moves higher from here, the initial upside target would be around 1.4494, where the blue resistance line currently is.

Having said that, let’s examine the weekly chart.

The situation in the medium term hasn’t change much as GBP/USD is trading in the blue consolidation under the lower border of the red declining trend channel, which suggests that as long as there is no breakout above the upper line of the formation (or breakdown under the lower line) another bigger move is not likely to be seen.

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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/JPY

On the medium-term chart, we see that overall situation remains unchanged as USD/JPY is still trading under the orange resistance zone created by the previous lows.

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

Although USD/JPY rebounded and approached the 38.2% Fibonacci retracement (based on the Jan 29-Feb 11 decline) in recent days, the exchange rate is trading in the blue consolidation. Therefore, in our opinion, another bigger upward/downward move will be more likely if we see a breakout/breakdown above/below the upper/lower border of the formation. Nevertheless, the current position of the Stochastic Oscillator suggests that currency bears will try to push the pair lower n the coming days.

Very short-term outlook: mixed with bearish
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.

Thank you.

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

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