Yesterday, the U.S. dollar extended losses against the Swiss franc, which pushed USD/CHF to the lower border of the declining trend channel. How did this support affect today’s price action?
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
Quoting our last commentary no this currency pair:
(…) although EUR/USD extended gains, the pair is still trading in the orange resistance zone. Additionally, the sell signals generated by the indicators remain in cards, supporting currency bears.
On top of that, when we take a closer look at the daily chart (…) we’ll see that EUR/USD increased to the yellow resistance zone, which together with the current position of the indicators (the RSI climbed to the level of 70, the CCI and the Stochastic Oscillator are very close to generating the sell signals) suggest that reversal and lower values of the exchange rate are just around the corner.
From today’s point of view, we see that the situation developed in line with the above scenario and currency bears pushed EUR/USD lower as we had expected. Additionally, the CCI and the Stochastic Oscillator generated the sell signals, increasing the probability of further deterioration. Therefore, we believe that what we wrote yesterday remains up-to-date also today:
(…) in our opinion, even if the pair moves a bit higher from current levels, the above-mentioned 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.
Very short-term outlook: bearish
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/CHF
In our Forex Trading Alert posted on November 20, we wrote the following:
(…) 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.
Looking at the daily chart, we see that the situation developed in line with the above scenario and the exchange rate slipped slightly below our downside targets. Thanks to yesterday’s drop, the pair reached the lower border of the brown declining trend channel, which together with the buy signals generated by the daily indicators suggests that higher values of USD/CHF are just ahead of us. Therefore, we think that if the pair moves higher from current levels, we’ll see (at least) an increase to the upper border of the formation (currently around 0.9900) in the following 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.
AUD/USD
Looking at the daily chart, we see that although AUD/USD increased and broke above the upper border of the grey declining trend channel yesterday, this improvement was very temporary and currency bears managed to erase this gain in the following hours. Earlier today, we saw similar situation (another unsuccessful breakout), which suggests that one more downswing is very likely – especially when we factor in the sell signal generated by the Stochastic Oscillator.
If this is the case, we’ll likely see a test of the recent low or even the support area created by the 76.4% and 78.6% Fibonacci retracements, which is currently reinforced by the lower border of the brown rising trend channel and the 50% Fibonacci retracement marked on the weekly chart.
Very short-term outlook: bearish
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
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
