Earlier today, the Australian dollar extended gains against its U.S. counterpart, which pushed AUD/USD above the upper line of the consolidation once again. Will this time currency bulls test the first important Fibonacci retracement?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: none
- USD/JPY: long (a stop-loss order at 107.62; the initial upside target at 114.30)
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Looking at the charts, we see that although EUR/USD moved sharply lower yesterday, currency bulls didn’t give up and pushed the exchange rate higher earlier today. Such price action suggests that we’ll see (at lest) a test of the recent highs later in the day. If they are broken, the next target for currency bulls will be around 1.1242, where the 70.7% Fibonacci retracement based on the entire May-January downward move is. Nevertheless, we should keep in mind that daily and weekly indicators are overbought and very close to generating sell signal, which increases the probability that reversal and lower values of EUR/USD in the coming week.
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/JPY
Looking at the daily chart, we see that the breakdown under the lower border of the blue consolidation encouraged currency bears to act, which resulted in a sharp decline earlier this week. Thanks to this drop USD/JPY declined slightly below the 61.8% Fibonacci retracement, but currency bulls managed to push the pair higher, which resulted in an invalidation of the breakdown. As a result, the exchange rate came back above 111, which together with the current position of the indicators (the CCI and the Stochastic Oscillator are overbought and very close to generating sell buy signals) suggests further improvement in the coming week. If this is the case and the pair extends rebound, we’ll likely see a test of the yellow resistance zone in the coming week.
Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): Long positions (with a stop-loss order at 107.62 and the initial upside target at 111.16) 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
Quoting our previous commentary on this currency pair:
(…) the pair stuck in the blue consolidation (…) Nevertheless, the current position of the weekly indicators suggests that even if the pair moves a bit lower, the next bigger move will be to the upside.
From today’s point of view we see that the situation developed in line with the above scenario and AUD/USD broke above the upper line of the blue consolidation once again. What’s next? Taking into account the proximity to the upper border of the red declining trend channel and the current position of the indicators (the Stochastic Oscillator generated the sell signal, while the CCI is overbought) we think that the exchange rate will correct the recent upward move in the coming week. However as long as there is no sell signal generated by the CCI another upswing and a test of the strength of the upper border of the red declining trend channel 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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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