Earlier today, official date showed that the euro zone’s consumer price inflation declined by 0.2% this month, while core CPI (without food, energy, alcohol, and tobacco costs) increased below forecasts, which pushed the euro lower against the greenback. What happened at the same time with our other currency pairs?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (stop-loss order at 1.1512; initial downside target at 1.0572)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Quoting our Forex Trading Alert posted on Feb 16:
(…) we think that the combination of the green horizontal resistance line (based on the mid-Dec high) and the upper border of the blue declining trend channel will stop further improvement and trigger further deterioration (…) Therefore, if the pair extends losses from here, (…) the pair will test the lower border of the green rising trend channel in the following days.
Looking at the daily chart, we see that the situation developed in line with the above scenario and EUR/USD reached our next downside target on Friday. Earlier today, the pair verified the breakdown, which suggests (at least) a test of the 61.8% Fibonacci retracement (at 1.0858). If this support level is broken, we may see a decline to around 1.0814, where the previously-broken long-term red declining line is.
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 1.1512 and the initial downside target at 1.0572) 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.
GBP/USD
Looking at the long-term chart, we see that GBP/USD extended losses and dropped under the 88.6% Fibonacci retracement, which suggests further declines. How low could the pair go in the coming week? Let’s examine the medium-term chart and find out.
On the weekly chart, we see that GBP/USD moved lower once again, which means that what we wrote on Thursday is up-to-date also today:
(…) taking into account the breakdown from the consolidation, we may see a decline even to around 1.3777, where the size of the downward move will correspond to the height of the formation. (…) it is worth noting that the Stochastic Oscillator generated a sell signal, supporting currency bears.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
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
In our last commentary on this currency pair, we wrote the following:
(…) Taking into account the fact that there are no buy signals, which could encourage currency bulls to act (although all our daily indicators are oversold), we think that another downswing is likely. Therefore, if the pair moves lower from here, the next downside target would be the Feb 11 low of 110.96.
On the daily chart, we see that currency bears pushed the exchange rate lower as we had expected and USD/JPY approached our downside target. As you see, the support level (based on the Feb low) in combination with buy signals generated by the indicators encouraged currency bulls to act, which resulted in a move to 113.97. Despite this improvement, the pair reversed and declined, which suggests further deterioration – especially when we factor in the current position of the Stochastic Oscillator (the indictor is very close to generating a sell signal). If this is the case, and USD/JPY declines from here, we may see a test of the recent lows.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish 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.
USD/CAD
On the weekly chart we see that USD/CAD is still trading under the upper border of the long-term rising trend channel, which doesn’t bode well for the exchange rate.
Are there any short-term factors that could encourage currency bulls to act? Let’s examine the daily chart and find out.
From this perspective, we see that USD/CAD extended losses and declined to the 61.8% Fibonacci retracement. Although his support triggered a rebound earlier today, the pair is still trading under the previously-broken lower green support line, which suggests that our pro bearish scenario from the previous commentary would be in play in the coming days:
(…) This (…) suggests that the exchange rate will test the lower border of the blue declining trend channel in the coming days (please note that this area is reinforced by the 70.7% Fibonacci retracement).
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
Quoting our last commentary on this currency pair:
(…) (the CCI and Stochastic Oscillator generated buy signals, while the daily Stochastic Oscillator is very close to doing the same), we think that another attempt to move higher is just around the corner. If we see such price action and the pair moves higher from here, the initial upside target would be he previously-broken blue resistance line (currently around 1.0000).
From today’s point of view we see that the situation developed in line with the above scenario and USD/CHF reached our next upside target earlier today. With this upward move, the pair also climbed to the 6.8% Fibonacci retracement, which could result in a reversal – similarly to what we saw in the previous week. Therefore, in our opinion, closing long positions (we opened them when USD/CHF was trading around 0.9741) and taking profits of the table is a good idea. Nevertheless, if we see an invalidation of the breakdown under the blue resistance line, we consider re-opening long positions.
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
On the weekly chart, we see that AUD/USD remains in the purple rising trend channel. Today, we’ll focus on the very short-term changes.
On Thursday, we wrote the following:
(…)AUD/USD invalidated earlier breakout above the green and brown lines, which in combination with sell signals generated by the indicators suggests further deterioration. Therefore, if the exchange rate moves lower from here, the initial downside target would be the blue support line based on the previous lows, which is also the lower border of the blue rising trend channel. If it is broken, the next target would be around 0.7090, where the 38.2% Fibonacci retracement (based on the entire Jan-Feb upward move) is.
On the daily chart, we see that the situation developed in line with the above scenario and AUD/USD slipped under the lower border of the blue rising trend channel on Friday. Although the pair rebounded earlier today, the blue resistance line stopped further improvement, which suggests that the exchange rate verified earlier breakdown. If this is the case, we’ll see a drop to the 38.2% Fibonacci retracement (around 0.7090) in the coming days.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
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
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