Yesterday, the greenback moved sharply lower against the Canadian Dollar, which resulted in a breakdown under important support line. 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 1.1563; 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 111.67; the initial upside target at 114.87)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (a stop-loss order at 0.7752; the initial downside target at 0.7473)

EUR/USD

Looking at the weekly chart, we see that the overall situation hasn’t changed much, because EUR/USD is still trading below both key resistance lines: the long-term red resistance line based on the August 2015 and May 2016 peaks and the red horizontal resistance line cased on the highest weekly closures. There are also negative divergences between the CCI, the Stochastic Oscillator and the exchange rate, which together with the sell signals generated by the daily indicators increases the probability of reversal in the coming days.

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 1.1563 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.

USD/CAD

On the daily chart, we see that USD/CAD moved sharply lower yesterday, which resulted in a breakdown under the lower border of the green declining wedge. As a result, the exchange rate slipped to the 127.2% Fibonacci extension, but will it manage to stop currency bears?

Let’s take a look and try to find the answer to this question.

From this perspective, we see that the breakdown under the lower border of the purple rising trend channel triggered a sharp decline, which took USD/CAD to the blue support zone. What’s next? The current position of the weekly and daily indicators suggests that reversal is just around the corner. Nevertheless, taking into account the height of the trend channel (marked with yellow), we should also consider further deterioration and a drop to the green support zone (based on the late April and May 2016 lows) in the coming week(s) (in this area the size of the move will correspond to the height of the trend channel).

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
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 the weekly chart, we see that although USD/CHF increased above the previously-broken red declining resistance line in the previous week and earlier this week, these improvements were temporary and the exchange rate pulled back. Such price action suggests that as long as there is no confirmed breakout above this line further rally is not likely to be seen. Nevertheless, buy signals generated by the indicators remain in place, supporting currency bulls and their attempts to move higher.

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. 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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