Earlier today, the British pound declined against the greenback, which took the pair slightly above the recent lows. Will we see a breakdown and lower values of GBP/USD in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.1402; the initial downside target at 1.1009)
• GBP/USD: short (a stop-loss order at 1.3232; the initial downside target at 1.2375)
• USD/JPY: long (a stop-loss order at 107.62; the initial upside target at 113.08)
• USD/CAD: long (a stop-loss order at 1.2931; the initial upside target at 1.3436)
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the daily chart, we see that EUR/USD moved lower yesterday, which resulted in a drop under the lower border of the blue consolidation. Earlier today, the pair increased a bit, but this move is tiny compared to yesterday’s decline. Therefore, we think that what we wrote yesterday is up-to-date:

(…) the yellow resistance zone marked on the weekly chart continues to keep gains in check, which suggests that another downswing may be just around the corner. If this is the case and the pair extends declines from current levels, the initial downside target will be around 1.1017, where the 38.2% Fibonacci retracement and the green support zone (marked on the daily chart) are.

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

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1402 and the initial downside target at 1.1009) 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 weekly chart we see that the situation has deteriorated slightly as GBP/USD declined under the long-term red declining resistance line once again. Additionally, the sell signals generated by the medium-term indicators remain in place, suggesting further deterioration.

Having said the above, let’s examine the very short-term picture.

From this perspective, we see that the upper border of the blue consolidation successfully stopped further increases, triggering a pullback yesterday. Earlier today, GBP/USD extended losses and slipped under the 38.2% Fibonacci retracement. Additionally, the Stochastic Oscillator generated the sell signal, which suggests further deterioration in the coming days. If this is the case and GBP/USD declines from current levels, we’ll likely see a drop to the 50% or even 61.8% Fibonacci retracement (at 1.2466) in the coming days.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3232 and the initial downside target at 1.2375) 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

The first thing that catches the eye on the weekly chart is an invalidation of the earlier breakdown under the red declining resistance line.

How did this move affect the very short-term picture? Let’s check.

From today’s point of view, we see that although currency bulls pushed USD/CHF higher yesterday, the upper border of the purple rising trend channel stopped further improvement. As a result, the exchange rate reversed and declined earlier today, which together with the current position of the daily indicators (they are very close to generating sell signals) suggests another attempt to move lower . Therefore, if the exchange rate closes today’s session under the red line seen on the daily chart, we may see a drop even to the lower border of the purple trend channel 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. 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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