Although the U.S. dollar increased recently against its Canadian counterpart, currency bulls didn’t manage to trigger an upward move above the 61.8% Fibonacci retracement for the third time in a row. Will their nearest ally be able to stop the selling pressure once again in the coming days?

• EUR/USD: long (a stop-loss order at 1.1260 the initial upside target at 1.1544)
• GBP/USD: none
• USD/JPY: short (a stop-loss order at 114.62; the initial downside target at 111.84)
• USD/CAD: short (a stop-loss order at 1.3299; the initial downside target at 1.2934)
• USD/CHF:short (a stop loss order at 1.0128; the initial downside target at 0.9881)
• AUD/USD: none

Before we go to today's analyzes of individual currency pairs, please pay attention to the fact that we no longer have long positions in USD/JPY, because they were closed yesterday with profit at the exit target level about which we wrote in the last analysis on this currency pair. Today, the market situation encouraged us to open opposite positions - all necessary data can be found in today's USD/JPY analysis. We invite you to read.

EUR/USD

Yesterday, we wrote the following:

The first thing that catches the eye on the daily chart is an invalidation of the earlier breakdown under the upper line of the orange declining trend channel. Taking this positive development into account and combining it with the lack of the sell signals, we think that further improvement is still ahead of us.

If this is the case and the pair moves higher from current levels, we’ll see at least a test of the 38.2% Fibonacci retracement (around 1.5000). If it is broken, the way to our initial upside target, the October 22 peak and the next retracement will be open.

From today’s point of view, we see that the situation developed in tune with our assumptions and EUR/USD moved sharply higher earlier today, reaching our first upside targets - the 38.2% Fibonacci retracement and making our long positions profitable.

Thanks to today’s upswing, the pair also broke above the short-term red declining resistance line based on the September 26 and the mid-October peaks, which increases the probability that we’ll see further improvement in the very near future – especially when we factor in the fact that there are still no sale signals that could encourage currency bears to act.

And speaking about indicators… the medium-term CCI and the Stochastic Oscillator generated buy signals (seen on the weekly chart below), supporting the buyers and (at least) an increase to our upside targets in the following days.

Connecting the dots, our profitable long positions continue to be justified from the risk/reward perspective at the moment of writing this alert.

Trading position (short-term; our opinion): Long positions with the stop-loss order at 1.1260 and the initial upside target at 1.1544 are justified from the risk/reward perspective.

USD/JPY

Quoting our yesterday’s alert:

(…) USD/JPY climbed to our upside target, but then reversed and pulled back, invalidating the earlier tiny breakout above the 61.8% Fibonacci retracement. Such price action together with the current position of the indicators suggests that another move to the downside from here is likely.

Therefore, if the exchange rate increases to 113.40 once again, we’ll close our long positions and take profits off the table (as a reminder, we opened them when the pair was trading at around 112.096).

Looking at the daily chart, we see that currency bulls triggered one more upswing, which allowed us to close our positions at a profit. Earlier today, the pair increased one again, but this improvement was very temporary as the upper line of the red rising wedge together with the 76.4%, the 78% Fibonacci retracements and the sell signals generated by the indicators encouraged the sellers to act.

As a result, the exchange rate reversed and dropped under the lower line of the red wedge, which suggests that further deterioration is just around the corner. If this is the case and USD/JY declines from current levels, we’ll likely see a drop to the green support area created by the recent lows and the 61.8% Fibonacci retracement in the following days.

Taking all the above into account, we think that opening short positions is justified from the risk/reward perspective. All needed details you will find below.

Trading position (short-term; our opinion): short positions with a stop-loss order at 114.62 and the initial downside target at 111.84 are justified from the risk/reward perspective.

USD/CAD

On the daily chart, we see that although USD/CAD bounced off the lower border of the pink rising trend channel in the previous week, currency bulls didn’t manage to successfully break above the recent peaks and the 61.8% Fibonacci retracement.

Earlier today, the above-mentioned resistances encouraged the sellers to act, which caused an invalidation of the earlier breakout above the upper border of the red declining trend channel. Thanks to today’s downswing the pair also slipped below the lower border of the pink rising trend channel, which increases the likelihood of further deterioration in the coming days.

If we see such price action, USD/CAD will likely drop to at least mid-October lows. At this point it is also worth noting that not far from them the size of the downward move will correspond to the height of the pink trend channel, which may be encouraging for the sellers and their willingness to take profits in this area.

Taking all the above into account, we think that opening short positions is justified from the risk/reward perspective at the moment of writing these words.

Trading position (short-term; our opinion): short positions with a stop-loss order at 1.3299 and the initial downside target at 1.2934 are justified from the risk/reward perspective.

USD/CHF

In our Forex Trading Alert posted on October 31, 2018, we wrote the following:

(…) USD/CHF also approached the red resistance zone created by the 76.4% and the 78.6% Fibonacci retracements, which was strong enough to trigger a reversal in May and July.

Therefore, in our opinion, further rally and a test of December 2016 peak will be more likely and reliable only if we see a successful breakout above the above-mentioned red zone. Until this time, one more reversal should not surprise us.

Looking at the weekly chart, we see that USD/CHF declined quite sharply (as we had expected), making our short positions profitable.

How did this drop affect the very short-term picture of the exchange rate?

From this perspective, we see that Monday’s unsuccessful attempt to break above the yellow resistance zone woke up the bears and lured them back to the trading floor. Thanks to their attack USD/CHF declined sharply, reaching the 23.6% Fibonacci retracement and approaching the lower border of the orange zone earlier today.

Although this area can trigger a small rebound, the sell signals generated by the daily indicators continue to support the sellers. Additionally, the medium-term indicators generated the sell signals, suggesting that lower values of the exchange rate in the very near future are very likely.

Connecting the dots, we believe that if the exchange rate extends loses from here, we’ll see at least a drop to around 0.9881, where the 38.2% Fibonacci retracement is.

Trading position (short-term; our opinion): Short positions with a stop loss order at 1.0128 and the initial downside target at 0.9881 are justified from the risk/reward perspective.

Thank you.

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

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