In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the weekly chart, we see that although ERU/USD moved higher earlier this week, the overall situation hasn’t changed much, because the exchange rate is still trading under the red resistance line based on the March and November 2015 lows. Therefore, as long as there is no successful breakout above this important line, further rally is not likely to be seen and another attempt to move lower should not surprise us – especially when we factor in the current situation in the very short-term chart.
From this perspective, we see that the 38.2% Fibonacci retracement encouraged currency bears to act, which resulted in a pullback yesterday. Thanks to this drop the exchange rate declined under the Fibonacci retracement and the orange zone, invalidating the earlier breakout. Although the pair rebounded earlier today, the current position of the indicators and the medium-term picture suggest that another reversal and lower values of EUR/USD are just around the corner (even if we see a re-test of the Fibonacci retracement first). Nevertheless, as long as the situation remains unclear waiting at the sidelines seems to be the best decision. As always, we will keep you – our subscribers – informed should anything change.
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. Nevertheless, if we see another daily closure below the 38.2% Fibonacci retracement and the orange zone we'll consider opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
On Tuesday, we wrote:
(…) the pair slipped to the 1.128 Fibonacci extension based on the October-December upward move and the 1.414 extension based on the entire 2009-2014 move up. This area triggered a rebound earlier today, which resulted in an invalidation of the earlier breakdown under the previous lows and the lower border of the purple trend channel marked on the daily chart. Taking all the above and the buy signals generated by the indicators into account, it seems that GBP/USD will extend gains (…) the initial upside target will be the green resistance zone and the January highs.
On the daily chart, we see that the situation developed in tune with the above scenario and GBP/US reached our upside target. Despite Tuesday’s sharp rebound currency bulls didn’t manage to push the pair higher. Why? We think that the best answer to this question will be the medium-term chart below.
From this perspective, we see that the yellow resistance area created by the January highs is reinforced by the previously-broken lower border of the red declining trend channel. This means that as long as there is no comeback above this line further improvement is not likely to be seen. Nevertheless, taking into account the buy signals generated by the daily indicators, it seems that currency bulls will re-test January peaks in the coming days.
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/CAD
On the weekly chart we see that USD/CAD rebounded and increased above the previously-broken lower border of the purple rising trend channel, invalidating the earlier breakdown. This improvement encouraged currency bulls to act, which resulted in further improvement.
How high could the exchange rate go in the coming days? Let’s take a closer look at the daily chart and find out.
Looking at the very short-term picture, we see that USD/CAD increased sharply and invalidated the breakdown not only under the green zone, but also below the lower border of the declining trend channel yesterday. Earlier today we saw another increase, which suggests that the pair will test the yellow resistance zone and the upper line of the purple trend channel in the coming days. If this resistance is broken, the way to the blue resistance line, the 76.4% and 78.6% Fibonacci retracements will be open.
Very short-term outlook: bullish
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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