Although the USD Index slipped under the level of 101 earlier today, currency bulls managed to stop further deterioration and triggered a rebound. How did this move affect the euro, yen, Canadian dollar and Swiss franc?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the above charts, we see that although EUR/USD moved little higher earlier today, the pair is still trading around yesterday’s high. Nevertheless, the CCI and Stochastic Oscillator generated buy signals, which suggest that further improvement and higher values of EUR/USD are just around the corner. If this is the case, we may see an increase even to the previously-broken green support zone based on the late Jan, late Feb and early March lows (around 1.0814-1.0825) later this week.
Very short-term outlook: mixed with bullish 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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
On the weekly chart, we see that currency bulls pushed sharply USD/JPY higher in the previous week, which resulted in a climb above the previously-broken lower border of the blue declining trend channel. In this way, the exchange rate invalidated earlier breakdown, which is a positive signal that suggests further improvement. But will we see such price action? In our opinion, as long as USD/JPY remains in the yellow resistance zone (created by the Feb, mid-March lows, Apr and late May highs), further rally is questionable and reversal seems to be just around the corner.
This scenario is also supported by the daily indicators.
From this perspective, we see negative divergences between the CCI, Stochastic Oscillator and the exchange rate. Additionally, the CCI generated a sell signal, while the latter indicator is very close to doing the same.
On top of that, when we zoom out our picture and focus on the long-term chart, we’ll see another negative technical factor.
As you see, this month’s increase approached USD/JPY to the previously-broken lower border of the brown declining trend channel, suggesting that the space for rally may be limited and increasing the probability of reversal in near future.
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
Looking at the daily chart, we see that although USD/CAD broke above the upper border of the blue rising trend channel, the 50% Fibonacci retracement (based on the entire Jan-May downward move) stopped further rally and triggered a pullback in the previous week. Earlier today, currency bears pushed the exchange rate lower once again, which resulted in an invalidation of the breakout above the blue line. Additionally, sell signals generated by the indicators remain in place, which suggests that USD/CAD may test the orange zone, the Nov 9 low and the 38l2 % Fibonacci retracement in the coming days.
Nevertheless, in our opinion, such price action will be more likely and reliable if currency bears manage to push the exchange rate below the upper border of the purple rising wedge marked on the weekly chart below.
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
On the weekly chart, we see that the overall situation hasn’t changed much as USD/CHF remains above the previously-broken green line.
Will the very short-term chart give us more clues about future moves? Lets check.
Looking at the daily chart, we see that USD/CHF is consolidating between the previously-broken upper border of the grey rising trend channel and the resistance area created by the 76.4% and 78.6% Fibonacci retracements. This means that a breakout above the upper line of the formation (or breakdown below the lower line) will indicate the direction of another bigger move. Nevertheless, the current position of the daily indicators (the CCI and Stochastic Oscillator generated sell signals, while the RSI remains above the level of 70) increases the probability of reversal and declines in very near future. If this is the case, and USD/CHF invalidates the breakout above the upper border of the grey trend channel, we’ll see a correction of recent rally and a test of the yellow zone, which serves now as support.
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, Gold & Silver Fund Manager
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