Forex Trading Alert originally sent to subscribers on February 22, 2017, 7:36 AM.
Earlier today, the British pound moved lower against the greenback after the Office for National Statistics showed that GDP growth for the whole of 2016 was smaller-than-expected. In this environment, GBP/USD invalidated the earlier breakout above the resistance line. Will this development trigger a drop below 1.2400 in the coming days?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (a stop-loss order at 1.0735; the initial downside target at 1.0388)
- GBP/USD: none
- USD/JPY: long (a stop-loss order at 111; the initial upside target at 115.43)
- USD/CAD: long (a stop-loss order at 1.2949; the initial upside target at 1.3302)
- USD/CHF: long (a stop-loss order at 0.9891; the initial upside target at 1.0180)
- AUD/USD: none
EUR/USD
On the above charts, we see that the exchange rate extended loses and broke below last week’s low, which suggests further deterioration. How low could the pair go in the coming days? We believe that the best answer to this question will be the quote from our yesterday’s alert:
(…) we’ll see a drop to (at least) 1.0460, where the 76.4% and 78.6% Fibonacci retracements are. If this area is broken, the next target for currency bears will be the January low of 1.0339.(…)
Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): Short (already profitable) positions with a stop-loss order at 1.0735 and the initial downside target at 1.0388 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
From today’s point of view, we see that although GBP/USD moved above the upper border of the triangle, this “improvement” was very temporary and the pair invalidated the breakout. This negative development triggered further deterioration, which suggests that our last commentary on this currency pair is still valid:
(…) the sell signals generated by the weekly indicators suggest another downswing. Therefore, if GBP/USD declines under the lower border of the formation, we’ll see a drop to around 1.2182, where the size of the downward move will correspond to the height of the formation. Taking all the above into account, if GBP/USD drops below the blue support line, we’ll likely open short positions.
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
On the daily chart, we see that USD/CHF extended gains and broke above the orange resistance zone and the 38.2% Fibonacci retracement, which means that what we wrote yesterday is up-to-date also today:
(…) Additionally, the Stochastic Oscillator re-generated the buy signal, suggesting another attempt to move higher. If this is the case, we’ll see a test of the next retracement or even an increase to the upper border of the blue rising trend channel in the coming days.(…)
Very short-term outlook: bullish
Short-term outlook: mixed with bullish bias
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): Long (already profitable) positions with a stop-loss order at 0.9891 and the initial upside target at 1.0180 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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