Earlier today, official data showed that Australian company gross operating profits declined by 1.9% in the second quarter, which pushed the Australian dollar lower against its U.S. counterpart. As a result, AUD/USD reversed once again and approached the Friday’s low. Where will the exchange rate head next?

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

• EUR/USD: short (a stop-loss order at 1.1445; the downside target around 1.0938)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

On the weekly chart we see that although EUR/USD moved slightly higher, the exchange rate is still trading well below the long-term red line and the previously-broken orange resistance zone, which suggests lower values of the exchange rate in the coming week (especially when we factor in sell signals generated by the indicators).

Having said that, let’s focus on the very short-term picture.

Looking at the daily chart we see that EUR/USD closed the previous week under the upper line of the rising trend channel. Although the exchange rate rebounded slightly earlier today, the green resistance line keeps gains in check. Taking this fact into account, it seems that today’s upswing may be a verification of the breakdown and we’ll see lower values of EUR/USD in the coming days. If this is the case, and the air moves lower from here, the next downside target would be around 1.1030, where the size of the downward move will correspond to the height of the blue consolidation and where the mid-Aug lows are.

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

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1445 are justified from the risk/reward perspective. The downside target around 1.0938. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CHF

The medium-term picture hasn’t changed much as USD/CHF is trading between the orange resistance line and the green support line, slightly below the last week’s high.

Will the daily chat give us more clues about future moves? Let’s check.

As you see on the above chat, the situation remains almost unchanged since our last commentary on this currency pair was posted as USD/CHF remains in a consolidation (marked with grey). Therefore a breakout above the upper line of the formation (or breakdown below the lower border) will indicate the direction of future moves. Nevertheless, taking into account buy signals generated by the RSI and CCI it seems that currency bulls will try to push the pair higher. In this case, if the exchange rate climbs above the last week’s high, we’ll see an increase to the 70.7% retracement (around 0.9713) or even a test of the resistance zone created by the 76.4% and 78.6% Fibonacci retracements around 0.9749-0.9763.

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

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.

AUD/USD

The situation in the medium term hasn’t changed much as AUD/USD is trading in the green support zone (based on the 76.4% and 78.6% Fibonacci retracement levels). Today, we’ll focus on the daily chart.

Looking at the daily chart, we see that AUD/USD is still trading in the consolidation (marked with blue) between the upper and lower border of the declining wedge (marked with orange). Therefore, we still think that as long as there is no daily closure above/below one of these lines a sizable upward/downward move is not likely to be seen. Nevertheless, the proximity to the upper border of the consolidation triggered another decline earlier today, which suggests a test of the lower line of the formation in the coming days.

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 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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