Although the U.S. dollar increased against its Canadian counterpart in recent days, USD/CAD reversed and pulled back earlier today after an increase to important resistance zone. Will this area withstand the buying pressure 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
On Monday, we wrote the following:
(…) in our opinion, even if the pair moves a bit higher from current levels, the (…) resistances in combination with the upper border of the blue rising trend channel will likely stop further improvement in the coming days.
If we see such price action, EUR/USD will reverse and test (at least) the lower border of the blue 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 slipped to our downside target earlier today. As you see, the lower border of the blue rising trend channel triggered a sharp rebound in the following hours. Despite this move, the exchange rate remains under the orange resistance zone marked on the monthly chart and the yellow resistance zone seen on the daily chart, which together with the sell signals generated by the indicators suggests that we’ll likely see reversal and a test of today’s low in the very near future.
Very short-term outlook: mixed with bearish bias
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): 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/JPY
On the daily chart, we see that the 50% Fibonacci retracement encouraged currency bulls to act, which resulted in a comeback above the previously-broken lower border of the purple rising trend channel. Despite this improvement, the pair reversed and declined earlier today, which looks like a verification of the earlier breakdown under the lower purple line.
If this is the case and the exchange rate closes today’s session under the lower border of the trend channel, we’ll see (at least) a test of the recent lows 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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
Although USD/CAD moved higher this week, the medium-term picture remains almost unchanged as the exchange rate is still trading in the blue consolidation. Therefore, in our opinion, 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
On the daily chart, we see that the green support zone triggered a rebound, which took USD/CAD to the previously-broken lower border of the purple rising trend channel and the orange resistance zone. Taking this fact into account and the current position of the daily indicators, it seems that reversal and lower values of the exchange rate may be just around the corner. Nevertheless, in our opinion, the pro-bearish scenario will be more likely and reliable only if the pair closes today’s session under the lower line of the trend channel. Why? If we see such price action, the exchange rate will invalidate today’s small breakout above the lower purple line, which will be a bearish factor. In this case, a comeback to the green support zone and recent lows should not surprise us.
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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