Yesterday, the U.S. dollar moved higher against its Canadian counterpart after the price of crude oil declined under the barrier of $40. Thanks to these circumstances, USD/CAD re-approached the resistance zone. Will currency bulls manage to break above it in the coming days?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: short (a stop-loss at 1.3579; initial downside target at 1.2519)
- USD/JPY: none
- USD/CAD: none
- USD/CHF: short (a stop loss at 0.9967; next downside target at 0.9590)
- AUD/USD: none
EUR/USD
On Monday, we wrote:
(…) there are no sell signals on the daily chart (while buy signals generated by the weekly indicators remain in place), which suggests that we may see another attempt to move higher and a test of our Friday’s target - the previously-broken medium-term brown line.
From today’s point of view, we see that currency bulls pushed EUR/USD higher as we had expected. With this move, the exchange rate approached our upside target, which triggered a pullback earlier today. Taking this fact into account and combining it with the current position of the indicators (the CCI and Stochastic Oscillator are very close to generating sell signals), we think that further deterioration is just around the corner. Nevertheless, such price action will be more likely and reliable if we see a daily closure under the Jul 5 high of 1.1186 (invalidation of earlier breakout). Until this time another attempt to reach the medium-term brown line can’t be ruled out.
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.
USD/CAD
On the weekly chart, we see that although USD/CAD invalidated earlier breakout above the upper line of the blue consolidation, currency bulls didn’t give up and pushed the exchange rate higher once again. Although this is a positive signal, we think that as long as there won’t be a weekly closure above the long-term green resistance line all upswing would be nothing more than a verification of earlier breakdown under this important line. Additionally, the CCI and Stochastic Oscillator approached levels, which could encourage currency bears to act in the coming week.
Having said he above, let’s examine the daily chart and find out what can we infer from it about future moves.
Quoting our Monday’s alert:
(…) USD/CAD slipped to the 38.2% Fibonacci retracement (based on the Jun-Jul upward move), approaching the purple rising line. (…) the combination of these supports encouraged currency bulls to act, which resulted in a rebound on Friday. Earlier today, we saw another attempt to move higher, which suggests that we may see further improvement and a climb to the previously-broken upper line of the blue 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 USD/CAD reached our upside target earlier today. What’s next? Buy signals generated by the indicators suggest further improvement and a re-test of the upper purple resistance line. However, taking into account the fact that the upper line of the blue rising trend channel and the yellow resistance zone stopped currency bulls several times in previous weeks, we think that history will repeat itself once again and we’ll see lower values of the exchange rate in the coming days. If this is the case and USD/CAD moves lower, the initial downside target would be the lower purple line, which serves as the nearest support at the moment.
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.
AUD/USD
Looking at the daily chart, we see that although the orange zone triggered a sharp rebound yesterday, the upper border of the red rising trend channel in combination with the 70.7% Fibonacci retracement stopped currency bulls, triggering a pullback earlier today. Additionally, the current position of daily and weekly indicators suggests that lower values of the exchange rate are just around the corner. Therefore, if AUD/USD moves lower from here, the initial downside target would be the orange zone (once again), which serves as the nearest support at the moment.
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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