We saw some nice moves in the currencies on Wednesday. After a couple of days hesitating, the euro has made a profitable move lower. The loonie bulls also made little headway. Wednesday was simply a risk-off day. On days like that, it's important to be positioned correctly just as the preceding move is running out of steam. The market is full of clues for those willing to listen, For those ready to profit.
EUR/USD
The euro bulls' breakout attempts have clearly failed. Taking a cue from Monday, EUR/USD reversed lower on Monday. And it was the same story early Wednesday, too. Needless to say, this has made our short position even more profitable. The pair trades currently close to its daily lows, at around 1.1185.
The exchange rate trades well below the upper border of the declining blue trend channel as seen on the daily chart. It's currently attacking the early – and late – March lows as marked by the orange support line. It's the same line the pair broke below in late April.
Additionally, the daily indicators continue to support the sellers. See for yourself the sell signals generated by the CCI and Stochastics.
USD/JPY
On Monday, USD/JPY broke below the blue support zone only to retrace much of the downside move the day after. This price action is marked as the green consolidation on the above daily chart. As of this writing, bulls have not managed to invalidate the breakdown.
To the contrary, the rate changes hands at around 109.20 currently. This fits the picture of what usually happens after a breakdown invalidation attempt fails. How far could the current downswing carry the bears?
The current position of the daily indicators and the proximity to the green support zone (the late-Jan. lows) suggest that the space for declines may be limited. A reversal in the coming days should not surprise us.
USD/CHF
The USD/CHF downward price momentum of recent days has culminated. The size of the downside move corresponded exactly to the height of the previous blue consolidation aka 'sideways trend.' After the lower border of the blue formation on the right was reached and temporarily breached, an upward reversal followed on Tuesday.
The upswing has hasn't been accompanied by any buy signals from the daily indicators, however. It increases the probability of one more downswing and a test of the 38.2% Fibonacci retracement in the coming days.
Thank you.