Earlier today, official data showed that German factory orders fell unexpectedly in August, while industrial orders declined by 1.8% from a month earlier, missing expectations for a 0.5% increase. Thanks to these disappointing numbers, the euro hit session lows against the greenback and re-approached the support line, which triggered another rebound. What’s next for EUR/USD?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (a stop-loss order at 1.1887; the downside target around 1.0938)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
The overall situation in the medium term remains almost unchanged as EUR/USD is still trading under the long-term red declining resistance line and the orange resistance zone (reinforced by the bearish evening pattern), which together continue to keep gains in check. Today, we’ll focus on the very short-term changes.
Yesterday, EUR/USD moved higher and approached the upper border of the red declining trend channel once again. However, similarly to what we saw on Friday, this solid resistance line triggered a sharp pullback, which resulted in a comeback to slightly above the blue support line. Earlier today, the exchange rate bounced off this line once again, which suggests another test of the red declining resistance line. In other words, we thik that as long as there is no successful breakout above the upper border of the red declining trend channel or a breakdown below the blue line, another sizable move is not likely to be seen and short-lived moves in both directions should not surprise us.
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 1.1887 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/CAD
Looking at the charts we see that USD/CAD extended losses and slipped under the green support line yesterday. This is a negative signal, which suggests further deterioration. How low could the exchange rate go? Taking into account the medium-term picture, we see that the recent downward move approached the pair to the previously-broken Mar 2009 high of 1.3062, which serves as the nearest support. Additionally, slightly below this level (around 1.3017) is also the lower border of the declining red trend channel, which could encourage currency bulls to act. At this point, it is also worth noting that the daily CCI and Stochastic Oscillator are oversold, while the RSI approached the level of 30, which together suggests that reversal may be just around the corner.
Very short-term outlook: mixed with bearish 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.
USD/CHF
The first thing that catches the eye on the weekly chart is an invalidation of the breakdown under the orange support/resistance line. Although this is a positive signal, we think that it would be more reliable only if we see a weekly close above this line and a comeback above the blue line.
Having said that, let’s check what impact this increase had on the daily chart.
Quoting our Friday’s alert:
(…) USD/CHF reversed and invalidated small breakout above the orange resistance line based on the previous highs (…) which translated into a sharp decline that took the exchange rate to the blue rising support line. If it withstands the selling pressure, we’ll see another test of the orange line.
From today’s point of view we see that the situation developed in line with the above scenario and USD/CHF came back above the previously-broken orange line after a re-test of the blue line. Although the pair gave up some gains earlier today, the current position of the indicators suggests that currency bulls will try to push the pair higher in the coming days. If this is the case and USD/CHF moves higher from here, the initial upside target would be around 0.9790, where the blue resistance line (marked on the weekly chart) and the Friday high are.
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.