Although currency bears pushed the greenback lower against its Canadian counterpart earlier today, the medium-term support line based on September and October lows continues to keep declines in check. What does it mean for USD/CAD?
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
Earlier today, EUR/USD slipped slightly below the previously-broken upper border of the purple declining trend channel, but then invalidated quickly this tiny drop, which triggered further improvement. Despite today’s increase, the exchange rate remains under the 50% Fibonacci retracement and the lower border of the orange resistance zone (marked on the monthly chart), which together with the sell signals generated by the monthly and daily indicators suggest that another move to the downside may be just around the corner.
Therefore, in our opinion, if the exchange rate reverses and declines from current levels, the initial downside target will be the upper border of the purple trend channel once again. Further deterioration however, will be even more likely if EUR/USD invalidates the breakout above the upper line of this formation in the following day(s). If we see such price action, we think that currency bears will not only test the green horizontal line, but also push the pair to the 38.2% Fibonacci retracement.
Very short-term outlook: mixed with bearish bias
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): Profitable short positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1510) 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/CAD
The situation in the medium term hasn’t changed much as USD/CAD still remains in the blue consolidation. Therefore, we think that as long as there is no breakout above the upper border of the formation or a breakdown under the lower line, the situation will remain a bit unclear and short-lived moves in both directions should not surprise us.
Will the very short-term chart give us more clues about future moves? Let’s check
Looking at the daily chart, we see that USD/CAD slipped to the lower border of the purple rising trend channel once again. Although this is a negative sign, we think that as long as there is no daily closure under this important support line a bigger move to the downside is not likely to be seen and anther rebound should not surprise us. If we see such price action, the first upside target for currency bulls will be the orange resistance zone created by the 61.8% Fibonacci retracement and the previous highs. Nevertheless, the way to higher levels will be open only if we see a breakout above this resistance area.
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.
USD/CHF
On Thursday, we wrote the following:
(…) As you can see on the weekly chart, yesterday drop approached the exchange rate to the lower border of the blue consolidation, which encouraged currency bulls to act. Additionally, the CCI and the Stochastic Oscillator are very close to generating buy signals, which increases the probability of further improvement and a test of the previously-broken lower border of the blue rising wedge.
Looking at the daily chart, we see that the situation developed in tune with our assumptions and USD/CHF almost touched our upside target. Despite this positive event, currency bulls didn’t manage to push the pair higher, which encouraged their opponents to act. As a result, the pair reversed and declined on the following day, which suggests that we’ll likely see a test of the last week low or even a drop to 38.2% Fibonacci retracement in the coming week.
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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