Although currency market will be closed over the weekend, investors will be focus on the Sunday’s Greek referendum on whether or not the country should accept its creditor's bailout terms. Before we know the results of the vote, let’s take a closer look at the current situation in our six currency pairs.
In our opinion the following forex trading positions are justified - summary:
EUR/USD
The situation in the medium term hasn’t changed much as the combination of the previously-broken long-term red declining line and the 23.6% Fibonacci retracement continues to keep gains in check, supporting currency bears.
What can we infer from the very short-term picture? Let’s check.
Looking at the daily chart, we see that although EUR/USD moved lower earlier today, the exchange rate reversed and approached yesterday’s high, which means that what we wrote in our previous alert is up-to-date:
(…) This suggests a test of the previously-broken yellow resistance area (created by the 50-day moving average and the last week’s lows) in the coming day(s). If it withstands the buying pressure and the exchange rate declines from there, it would be a negative signal, which will suggest that (…) upswing is nothing more than a verification of the breakdown. In this case, we’ll see another pullback and the initial downside target would be (…) the green support zone.
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
On the weekly chart, we see that GBP/USD extended losses and declined to the previously-broken 38.2% Fibonacci retracement, which triggered a small rebound. Nevertheless, the space for further increases seems limited as the orange resistance zone (created by the 50% Fibonacci retracement and the red resistance line based on the previous highs) supports currency bears. Therefore, in our opinion, a sizable upward move will be likely only if we see a breakout above this area.
Having said that, let’s take a closer look at the daily chart.
From this perspective we see that GBP/USD broke below the lower border of the consolidation (marked with blue), which resulted in a drop to the green support zone created by the 50% Fibonacci retracement (based on the June rally) and the lower border of the blue declining trend channel. This area encouraged currency bulls to act and the exchange rate moved little higher earlier today. Will we see further improvement? Taking into account the current position of the indicators (they are very close to generating buy signals), it seems that GBP/USD will extend gains and climb to the upper border of the blue trend channel in the coming days.
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
On the above chart, we see that the green support zone created by the previously-broken 76.4% and 78.6% Fibonacci retracement levels supports currency bulls, keeping declines in check.
Where will the pair head next? Let’s examine the daily chart and find out.
Quoting our yesterday’s commentary:
(…) the red declining line (it was strong enough to stop further improvement and trigger a decline in the previous week) and the orange resistance zone (…) stopped further rally and the pair erased all today’s gains. This suggests that we could see a drop to around 122.82 (the 50% Fibonacci retracement based on this week’s rebound)
Looking at the daily chart we see that the situation developed in line with the above scenario and USD/JPY reached our initial downside target. Taking into account the fact that the exchange rate remains well below the red declining line, we think that further deterioration is just around the corner. If this is the case, and the pair moves lower from here, we may see a drop even to the support area created by the 76.4% and 78.6% retracements (around 122.35) in the coming day(s). Please keep in mind that that as long as there is no breakout above the orange area, further improvement is not likely to be seen.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bullish
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.
USD/CAD
The situation in the medium term has improved as USD/CAD extended gains and broke above the blue resistance line. Despite this upswing, the yellow resistance zone (created by the Apr highs and the 88.6% Fibonacci retracement) stopped further rally, triggering a pullback and suggesting a test of the nearest support (the previously-broken blue line, which is currently around 1.2510).
What impact did this drop have on the very short-term picture? Let’s check.
On Wednesday, we wrote the following:
(…) USD/CAD moved sharply higher and broke above (…) the long-term blue resistance line (…), which suggests a rally to the June highs
As you see on the daily chart, currency bulls not only took USD/CAD to our upside target, but also managed to push the pair to the orange resistance zone created by the 76.4% and 78.6% Fibonacci retracement levels. Yesterday, this solid area stopped further rally triggering a correction of the recent rally. With this downswing, the exchange rate dropped below the June high, invalidating earlier breakout. Taking this fact into account, and combining it with the current position of the indicators (the CCI and Stochastic Oscillator are overbought, while the RSI approached the level 70), we think that further deterioration is just around the corner (especially if we see another daily close under the June high).
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.
USD/CHF
In our last commentary on this currency pair, we wrote:
(…) the pair extended gains and broke above the key resistance – the red declining line based on the May 27 and June5 highs. This is a positive signal, which suggests higher values of the exchange rate in the coming days. (…) If currency bulls succeed, the initial upside target would be the orange resistance zone (around 0.9460-09500).
Looking at the charts, we see that the situation developed in tune with the above scenario and USD/CHF reached our upside target. Yesterday, the exchange rate broke above the orange resistance zone, but this improvement was only temporary and the pair reversed, invalidating earlier breakout. This negative signal triggered further deterioration earlier today, which in combination with the current position of the daily indicators (the CCI generated a sell signal, while the Stochastic Oscillator is very close to doing the same) suggests lower values of USD/CHF in the coming week. If this is the case, and the pair moves lower from here, the initial downside target would be around 0.9377, where the previously-broken line (based on the May 27 and June5 highs) is.
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.
AUD/USD
Quoting our yesterday’s Forex Trading Alert:
(…) AUD/USD declined sharply and reached the green support zone created by the June lows. (…) if (…) the pair drops under the support zone, we’ll likely see a decline to the Apr lows.
On the above charts, we see that currency bears not only took AUD/USD to our downside target, but also managed to push the pair below Apr lows. This is a bearish signal, which suggests further deterioration (especially if the exchange rate closes today’s session below the green zone). How low could the pair go? In our opinion, the initial downside target would be around 0.7489, where the 70.7% Fibonacci retracement (marked on the weekly chart) is. If this support is broken, we may see a decline to around 0.7452 (the 112.8% Fibonacci extension based on the Apr-May rally marked on the daily chart) or even to 0.7345-0.7360, where the 127.2% extension and the long-term brown support line are.
Very short-term outlook: bearish
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
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
