Earlier today, official data showed that the euro zone’s industrial production (month-to-month) declined in May, missing analysts’ forecast. Thanks to this lower-than-expected reading EUR/USD extended losses and slipped under yesterday’s lows. 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 (a stop-loss at 1.1236; initial downside target at 1.0708)
• GBP/USD: short (a stop-loss at 1.3579; initial downside target at 1.2519)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Although EUR/USD increased yesterday, currency bulls didn’t manage to push the pair above the upper border of the blue consolidation, which resulted in a pullback. Earlier today, the exchange rate extended losses, which means that what we wrote yesterday remains up-to-date:

(…) EUR/USD remains in a blue consolidation under the previously-broken long-term brown resistance line, which suggests that as long as there won’t be invalidation f the breakdown under this important line another attempt to move lower is likely. Therefore, if the pair extends losses, the initial downside target would be the lower border of the red declining trend channel (…)

(…) sell signals generated by the indicators remain in place, supporting further deterioration and a re-test of the strength of the long-term green support line (currently around 1.0708) in the coming week(s).

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 1.1236 and initial downside target at 1.0708 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

On the weekly chart, we see that GBP/USD moved sharply higher and increased to the previously-broken lower border of the red declining trend channel, which looks like a verification of earlier breakdown. If this is the case, lower values of the exchange rate are just around the corner. At this point it is also worth noting that despite this week’s move, the pair is still trading under the neck line of the head and shoulders formation, which means that what we wrote in our previous commentary on this currency pair is up-to date also today:

(…) GBP/USD dropped under the lower border of the red declining trend channel and hit a fresh multi-year low. This is a strong bearish signal, which suggests further deterioration and a drop even to around 1.2161, where the size of the downward move will correspond to the height of the formation.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish

Trading position (short-term; our opinion): Short positions with a stop-loss at 1.3579 and the initial downside target at 1.2519 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

Looking at the above charts, we see that USD/JPY moved higher yesterday, which means that our previous commentary is up-to-date:

(…) all daily indicators generated buy signals, supporting further improvement. As a result, USD/JPY extended gains earlier today, which suggests that we’ll see a test of the orange resistance zone (around 106.06-106.73) in the coming day(s).

Very short-term outlook: bullish
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.

USD/CAD

From the medium-term perspective, we see that USD/CAD is still consolidating under the long-term green rising line, which serves as the nearest resistance.

What can we infer from the daily chart? Let’s check.

Yesterday, we wrote the following:

(…) the combination of the blue rising trend channel and the yellow resistance zone encourage currency bears to act, which resulted in a decline earlier today. Thanks to this drop, the exchange rate invalidated yesterday’s small breakout above the blue resistance line, which in combination with the current position of the daily indicators (they are very close to generating sell signals) suggests further deterioration in the coming days.

From today’s point of view, we see that currency bears pushed USD/CAD lower as we had expected. Although the pair moved higher earlier today, the yellow resistance zone and the upper border of the blue rising trend channel are still in place, supporting further deterioration. Additionally, the CCI and Stochastic Oscillator generated sell signals, which means that our downside target would be in lay in the coming day(s):

(…) If this is the case, and USD/CAD moves lower from current levels, we’ll likely see a test of the upper border of the red declining trend channel (currently around 1.2949) 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.

USD/CHF

On the daily chart, we see that USD/CHF bounced off the orange zone and increased to the yellow resistance area. Although this is a positive event, we should keep in mind that this resistance was strong enough to stop currency bulls in May. Additionally, all indicators are very close to generating sell signals, which suggests that reversal and lower values of USD/CHF are just around the corner. If this is the case, and the pair declines, the first downside target would be the previously-broken orange zone, which serves now as the nearest support. If it is broken, we may see declines to around 0.9683, where the Jul 5 low is.

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.

AUD/USD

Yesterday, AUD/USD moved sharply higher and broke above the red resistance line (parallel to the neck line of a potential head and shoulders formation), hitting a fresh monthly high. Although the pair gave up some gains earlier today, it seems that as long as there won’t be a daily closure under the red line further declines are questionable and another rebound can’t be ruled out. If this is the case and the exchange rate moves higher once again, we may see an increase to around 0.7670-0.7686, where the next resistance zone (created by the 76.4% and 78.6% Fibonacci retracements) is. Nevertheless, we should keep in mind that the current position of the indicators (the CCI and Stochastic Oscillator are very close to generating sell signals) suggests that reversal and lower values of AUD/USD are just around the corner.

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.

On an administrative note, due to my travel plans, there will be no Forex Trading Alerts on Thursday and Friday (the next Forex Trading Alert is scheduled for Monday, Jul 18). Nevertheless, if the situation changes significantly, we will send you a quick note with our latest analysis and thoughts on that matter.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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