Forex Trading Alert originally sent to subscribers on September 8, 2015, 5:58 AM.
On Friday, the Labor Department showed that the U.S. economy added 173,000 jobs in Aug (the smallest increase in employment since Apr), missing analysts’ expectations for a 220,000 gain. However, the unemployment rate slipped to 5.1% (which was the lowest level since April 2008) and average hourly wages increased by 2.2%. These mixed numbers added to uncertainty over whether the Fed will raise interest rates later this month and pushed USD/CHF little lower. Where will the exchange rate head next in the coming days?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (a stop-loss order at 1.1445; the downside target around 1.0938)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
The situation in the medium-term hasn’t changed much as EUR/USD is still trading under the long-term red line and the previously-broken orange resistance zone, which suggests lower values of the exchange rate in the coming week (especially when we factor in sell signals generated by the indicators).
Will the very short-term chart give us more clues about future moves? Let’s check.
From this perspective, we see that EUR/USD bounced off the Friday’s low, but despite this move, the exchange rate is still trading under the previously-broken upper border of the rising trend channel (marked with green) and well below the lower line of the blue rising wedge, which suggests that as long as there is no invalidation of the breakdown under these lines further deterioration is more likely than not. Therefore, we believe that hat we wrote on Friday is still up-to-date:
(…) if the pair drops under the lower line of the rising wedge (marked with blue), the next downside target would be around 1.1030, where the size of the downward move will correspond to the height of the blue consolidation and where the mid-Aug lows are.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed with bearish bias
LT outlook: mixed
Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1445 are justified from the risk/reward perspective. The downside target around 1.0938. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
The medium-term picture hasn’t changed much as USD/CAD is trading above the 2008 high. Today, we’ll focus on the daily chart.
From today’s point of view, we see that the overall situation in the short-term hasn’t changed much as USD/CAD is still trading in the blue consolidation. Therefore, our last commentary is still valid:
(…) we think that as long as there is no breakout above the upper line of the formation another test of the green resistance line is not likely to be seen. On the other hand, a sizable downward move is also questionable unless we see a daily closure below the lower border of the consolidation (in this case, the initial downside target would be around 1.2950-1.3015, where the bottom of the previous pullback and the 23.6% Fibonacci retracement based on the entire May-Aug rally are).
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
The medium-term picture has improved as USD/CHF extended gains and reached the orange resistance line, which could trigger another downward move in the coming week – similarly to what we saw at the beginning of Aug.
Will the very short-term picture confirm this scenario? Let’s check.
Looking at the daily chat, we see that USD/CHF is consolidating slightly below the orange resistance zone. Therefore, if currency bulls manage to push the pair higher, we may see an increase to around 0.9826, where the size of the upward move will correspond to the height of the grey consolidation and where the 88.6% Fibonacci retracement is. Nevertheless, taking into account the current position of the indicators (the CCI generated a sell signal, while the Stochastic Oscillator is very close to doing the same) and the medium-term picture, it seems to us that the space for further rally is limited and reversal in the coming days should not surprise us.
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. 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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