Although USD/CAD invalidated the earlier breakout above the upper line of the rising trend channel, currency bulls try to push the pair higher. Will we see the exchange rate above 1.3800 in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.1052; the initial downside target at 1.0521)
• GBP/USD: none
• USD/JPY: long (a stop-loss order at 107.62; the initial upside target at 111.16)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Yesterday, we wrote the following:

(…) the long-term red declining resistance line based on the May and November 2016 highs stopped further improvement, triggering a pullback (…) As a result, the exchange rate came back not only under the red line, but also below the upper border of the brown rising trend channel, invalidating the earlier breakouts. This is a bearish development, which suggests further deterioration in the coming week(s).

(…) How low could the pair go in the coming days? In our opinion, the first downside target for currency bears will be around 1.0851, where the lower border of the recent consolidation and the 38.2% Fibonacci retracement based on the April upward move are.

Looking at the charts, we see that the situation developed in line with the above scenario and currency bears pushed the exchange rate lower. Thanks to drop, the pair erased around 30% of the recent upward move, which means that our first downside target will be in play in the coming day(s). Nevertheless, the sell signals generated by the indicators remain in place, suggesting lower values of the exchange rate. Therefore, if EUR/USD drops under 1.0851, we’ll likely see a test of the nex Fibnacci retracements in the following days.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.1052 and the initial downside target at 1.0521) 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 daily chart, we see that although USD/CAD climbed above the upper border of the brown rising trend channel, the 127.2% Fibonacci extension and the proximity to the 61.8% retracement seen on the weekly chart (based on the entire January-May 2016 downward move) encouraged currency bears to act. As a result, the pair moved sharply lower, invalidating the earlier breakdown. Although this is a bearish development, which suggests further deterioration, the Stochastic Oscillator generated the buy signal, suggesting that we’ll likely see another test of the recent highs and the above-mentioned resistance levels first.

Very short-term outlook: mixed with bullish bias
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

From the medium-term perspective, we see that AUD/USD declined under the lower border of the blue consolidation, which pushed the exchange rate to the 70.7% Fibonacci retracement seen on the daily chart. In this area, the size of the downward move corresponded to the height of the consolidation, which reduced the selling pressure. Additionally, the current position of the daily and weekly indicators suggests that reversal and higher values of AUD/USD are just around the corner.

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.

Thank you.

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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts