Forex Trading Alert originally sent to subscribers on January 14, 2016, 7:59 AM.
Earlier today, EUR/USD moved higher against the U.S. currency ahead of a European Central Bank president Mario Draghi speech. As a result, the exchange rate broke above the upper border of the trend channel. Is it enough too trigger further rally?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (stop-loss order at 1.1363; initial downside target at 1.0462)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Yesterday, EUR/USD invalidated small breakdown under the green support zone, which triggered a rebound. Earlier today, the pair extended gains, which resulted in a breakout above the upper border of the brown declining trend channel. Although this is a positive signal, which suggests further improvement, the exchange rate remains under the 38.2% Fibonacci retracement (and well below the navy blue resistance line and the previous highs) and the Monday’s high. Additionally, sell signals generated by the indicators remain in place, supporting currency bears. On top of that, the medium-term outlook remains bearish. Why? Let’s examine the weekly chart and find out.
From this perspective, we see that EUR/USD is still trading under the long-term red declining line, which serves as the key resistance at the moment. Therefore, as long as there is no weekly closure above it another downswing is more likely than not.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: mixed
Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.1363 and the initial downside target at 1.0462) 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.
GBP/USD
Looking at the above charts, we see that the overall situation hasn’t changed much since our last commentary was posted because GBP/USD is still trading under the lower border of the red declining trend channel, sill around the 112.8% Fibonacci extension. Therefore, what we wrote on Tuesday is up-to-date:
(…) GBP/USD approached the support zone created by the 76.4% and 78.6% Fibonacci retracements, which could stop declines in the coming weeks. Nevertheless, before we see such price action, the pair could drop to around 1.4190-1.4296, where the nearest support levels are.
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/JPY
On Tuesday, we wrote the following:
(...) Taking into account the current position of the indicators (weekly and daily), we think that further improvement is just around the corner. If this is the case, and USD/JPY increases from here, the initial upside target would be around 118.30, where the 23.6% Fibonacci retracement (based on the recent downward move) is.
Looking at the above charts, we see that the situation developed in line with the above scenario and USD/JPY reached our initial uside target. As you see, the first Fibonacci retracement triggered a pullback, which took the pair below 118 once again. Nevertheless, taking into account buy signals generated by the indicators, we think hat another attempt to move hgher is just around the corner. If this is the case, and the pair climbs above yesterday’s high the next target for currency bulls would be around 119.32, where the 38.2% retracement is.
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
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