On Friday, the U.S. dollar moved sharply higher against other major currencies as stronger-than-expected U.S. jobs data supported the greenback. Earlier today, these bullish numbers continued to weigh, which pushed USD/CHF higher. But did this move change the short-term picture of the exchange rate?

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

• EUR/USD: long (stop loss order at 1.1056 - please note that we lowered it)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: short (stop loss order at 1.2676)
• USD/CHF: none
• AUD/USD: none

EUR/USD

The medium-term picture hasn’t changed much as and invalidation of the breakdown below the 61.8% Fibonacci retracement and its positive impact on the exchange rate are still in effect. Having said that, let’s focus on the daily chart.

On the daily chart, we see that EUR/USD slipped below the lower border of the consolidation, which suggests that we could see another pullback later in the day. Nevertheless, we believe that as long as the pair is trading above the previously-broken red declining support/resistance line, higher values of the exchange rate are still ahead us.

Very short-term outlook: bullish
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term): Long positions with a stop loss order at 1.1056 are justified from the risk/reward perspective at the moment. Please note that we lowered the stop-loss level. The reason is that we changed our approach toward the current long position. We opened it as a quick, several-day long position, but it now seems that this trade may take a week or more to complete. At the same time the outlook remains bullish and it seems that it will remain bullish even if the euro moves even lower. By exiting the position now, we might miss the volatile bounce (something similar to what we saw on the gold market on Friday, but in the opposite direction). We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

The situation in the medium-term remains unchanged as USD/CAD is still trading under the previously- broken 88.6% Fibonacci retracement and well below the long-term red declining resistance line. Therefore, what we wrote on Friday is up-to-date:

(…) This (…) bearish signal (…) suggests a drop to the 23.6% (around 1.2275) or even 38.2% (at 1.1973) Fibonacci retracement based on the entire Jun-Jan rally in the coming week.

Are there any short-term factors that could hinder the realization of the above scenario? Let’s examine the daily chart and find out.

As you see on the above chart, although USD/CAD move higher on Friday, the exchange rate still remains in a consolidation (marked with blue) below the previously-broken long-term blue resistance line. Taking this fact into account (and combining it with the medium-term picture), we think that another attempt to move lower and a test of the lower border of the consolidation is likely.

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

Trading position (short-term; our opinion): Short positions with a stop loss order at 1.2676 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/CHF

Looking at the above charts, we see that although USD/CHF moved little higher earlier today, the pair remains in a consolidation under the orange resistance zone (created by the 50% Fibonacci retracement and the Oct 2014 low). Therefore, our last commentary on this currency pair is still valid:

(…) in this area is also the long-term red resistance line (based on the weekly opening prices), which reinforces the zone. Therefore, we believe that as long as there is no breakout above these levels, higher values of the exchange rate are questionable and further deterioration can’t be ruled out (…)

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

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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