In recent days, the U.S. dollar extended losses against the Swiss franc, which erased around 70% of the entire December increase. Are there any technical factors that could stop currency bears in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.2250; the initial downside target at 1.1510)
• GBP/USD: short (a stop-loss order at 1.3773; the next downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

The first thing that catches the eye on the daily chart is today’s breakout above the upper border of the blue consolidation. Taking this fact into account, we can see a test of the late-November high or even an increase to the 78.6% Fibonacci retracement, where the size of the move will correspond to the height of the consolidation.

Will EUR/USD climb above the orange resistance zone? The current position of the daily indicators suggests that the space for increases is limited and reversal is just around the corner – especially when we factor in the situation in the medium term on the chart below.

From the broader perspective, we see that the exchange rate moved to the upper border of the yellow consolidation, which can stop currency bulls in the coming days – similarly to what we saw at the end of November. If we see such price action, EUR/USD will likely test the lower line of the consolidation at the beginning of January.

Trading position (short-term; our opinion): short positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1510) continue to be 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 daily chart, we see that GBP/USD broke above the upper border of the red declining trend channel earlier today. Although this is a positive sign, we believe that the space for gains is limited by the brown resistance zone (created by the previous highs, the 76.4% and 78.6% Fibonacci retracements and the long-term red declining resistance line) and even if the pair increases from current levels a bit, the next bigger move will be to the downside. Nevertheless, this pro-bearish scenario will be even more likely if the pair closes today’s session under the upper border of the trend channel and invalidates this tiny breakout.

Trading position (short-term; our opinion): short positions (with a stop-loss order at 1.3773 and the next downside target at 1.3000) continue to be 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

From the short-term perspective, we see that USD/CHF extended losses in recent days, which together with the sell signals generated by the daily indicators suggest that we’ll see a test of the lower border of the red declining trend channel in the very near future. Nevertheless, even if currency bears manage to push the pair below the lower line of the formation, we think it will be very temporary, because the green support zone (created by the recent lows and the 50% Fibonacci retracement) is quite close and blocks the way to lower levels.

At this point, it is also worth noting that in this area is also the lower border of the blue consolidation (marked on the chart below), which could encourage currency bulls to act.

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 Fund Manager

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