Yesterday, USD/CHF broke above the 38.2% Fibonacci retracement, but is is enough to trigger further improvement in the coming week?
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 1.1466)
- GBP/USD: short (a stop-loss order at 1.3773; the initial downside target at 1.3317)
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Quoting our Wednesday alert:
(…) EUR/USD moved a bit higher earlier today, but did it change anything? In our opinion, it didn’t, because the exchange rate is still trading not only well below the lower border of the brown rising trend channel, but also under the blue resistance line, which means that the head and shoulders formation is underway (and it will be as long as we do not see an invalidation of the breakdown under blue line). Additionally, the sell signals generated by the weekly and daily indicators (except the CCI, which generated the buy signal) remain in cards, supporting currency bears and lower values of EUR/USD.
From today’s point of view, we see that EUR/USD moved lower (as we had expected), making our short positions more profitable. Thanks to yesterday drop the pair closed the day below the 23.6% Fibonacci retracement, which triggered further deterioration earlier today. Additionally, the CCI invalidated the earlier buy signal, which together with a decline under the previously-broken 38.2% Fibonacci retracement (seen on the weekly chart) suggests further deterioration and a downward move to around 1.1596, where the size of the move will correspond to the height of the head and shoulders formation.
However, when we take into account a drop under the lower border of the brown rising trend channel and the broader picture of EUR/USD, we think that currency bears push the exchange rate even lower – to around 1.1508, where the size of declines will be equal to the height of trend channel. Taking all the above into account, we believe that our profitable short positions continue to be justified from the risk/reward perspective.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): Short profitable positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1466) 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
Looking at the daily chart, we see that the overall situation in the very short-term hasn’t changed much as USD/JPY is still trading in the blue consolidation around the resistance area created by the 76.4% and 78.6% Fibonacci retracements in the previous week.
What’s next for the exchange rate? Taking into account the fact that there are no sell signals generated by the indicators, we think that we’ll see one more upswing and a test of the 88.6% Fibonacci retracement in the coming days.
Very short-term outlook: mixed with bullish 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/CHF
Quoting our last commentary on this currency pair:
(…) Earlier today the pair extended losses and reached the lower border of the blue rising wedge, which could stop further deterioration. Nevertheless, if we see a daily closure below this support line, currency bears could push the exchange rate to the blue support zone (created by the late September lows) in the coming days.
On the above charts, we see that although USD/CHF declined on Wednesday, the above-mentioned lower border of the blue rising wedge stopped currency bears, triggering a rebound. As a result, the exchange rate came back to the yellow resistance zone and broke above the 38.2% Fibonacci retracement (based on the entire 2017 downward move) yesterday, which together with the buy signal generated by the Stochastic Oscillator (and lack of sales signals generated by other indicators) suggests one more upswing and a test of the upper border of the orange declining trend channel (or even the upper line of the blue rising wedge) in the coming week (the area around 0.9822-0.9837).
Very short-term outlook: mixed with bullish 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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