Forex Trading Alert originally sent to subscribers on December 10, 2015, 11:50 AM.
Earlier today, the U.S. Department of Labor reported that the number of initial jobless claims in the week ending December 4 rose by 13,000 to 282,000, missing analysts’ forecasts. As a result, the USD Index moved slightly lower, but did it change anything in the short-term picture of the euro?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the weekly chart, we see that EUR/USD invalidated breakout above the barrier of 1.1000 and the green line based on the Mar and Apr lows, which suggests further declines.
How did this move affect the very short-term picture? Let’s check.
Quoting our previous commentary:
(…) the exchange rate extended gains, which resulted in a climb to our yesterday’s upside target. If the pair moves higher from here, we’ll see a test of the strength of the previously-broken green resistance line (based on the Mar and Apr lows and marked on the weekly chart) in the coming day(s). If it is broken, currency bulls will likely push EUR/USD to the last week’s high.
As you see on the daily chart, currency bulls not only took the pair to our upside target, but also pushed it above the 38.2% Fibonacci retracement. Despite this improvement, they didn’t manage to hold gained levels, which resulted in a reversal earlier today. With this downswing, the exchange rate invalidated yesterday’s breakouts, which is a negative signal that suggests further declines and a test of the Wednesday’s low.
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 at the moment. Nevertheless, taking all the above factors in to account we’ll consider re-opening short positions if EUR/USD declines and closes the day below the green support zone. 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 bounced off the orange zone and the lower border of the green rising trend channel, which resulted not only in a rally to a fresh 2015 high, but also in a breakout above the upper border of the channel. This positive signal triggered further improvement and an increase to the 127.2% Fibonacci extension. As you see this resistance level pushed the pair little lower, but USD/CAD remains in the blue consolidation. Although the current position of the indicators suggests further declines, we think that earlier breakouts and the current situation in crude oil (if you want to have a more complete picture of the commodity and the oil sector we encourage you to sign up for Oil Trading Alerts or the Fundamental Package that includes it) will encourage currency bulls to act – especially when we factor in the long-term picture.
From this perspective, we see that the next upside target for currency bulls would be around 1.3700, where the upper border of the red rising trend channel 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.
AUD/USD
The proximity to the previously-broken orange line and the green support zone stopped currency bears, which resulted in a rebound.
What impact did this move have on the daily chart? Let’s check.
Looking at the daily chart we see that the breakdown under the lower border of the brown trend channel triggered a decline to the green support zone based on the previous lows. This area, in combination with the medium-term supports triggered a sharp rebound, which took the pair to the trend channel. In this way, AUD/USD invalidated earlier breakdowns, which is a positive signal that suggests further improvement – especially when we factor in the current position of the indicators. Therefore, if the pair closes the day above the orange resistance zone, we may see not only a test of the recent high, but also a climb to the upper border of the short-term trend channel (currently around 0.7418) 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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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