Forex Trading Alert: Uncertainty around ECB Decisions

By: Nadia Simmons & Przemyslaw Radomski | Thu, Mar 10, 2016
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Forex Trading Alert originally published on March 10, 2016, 7:38 AM


 

Earlier today, the euro declined against the U.S. dollar once again as uncertainty around today's ECB decisions continues to weight on the European currency. Thanks to these circumstances, EUR/USD dropped under the barrier of 1.1000. Will we see a test of the recent lows in the coming days?

In our opinion, the following forex trading positions are justified - summary:

EUR/USD: short (stop-loss order at 1.1512; initial downside target at 1.0572)
GBP/USD: none
USD/JPY: none
USD/CAD: none
USD/CHF: none
AUD/USD: none


EUR/USD

EUR/USD Weekly Chart
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EUR/USD Daily Chart
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Quoting our previous alert:

(...) the orange resistance zone (created by the 38.2% Fibonacci retracement and the horizontal resistance line based on the mid-Dec highs) continues to keep gains in check. Taking this fact into account, and combining it with the current position of the Stochastic Oscillator (the indicator is very lose to generating a sell signal), we think that reversal is just around the corner.

Looking at the daily chart, we see that the situation developed in line with the above scenario and EUR/USD moved lower. With today's downswing, the pair slipped under the previously-broken lower border of the green rising trend channel, which suggests further deterioration - especially when we factor in a sell signal generated by the Stochastic Oscillator.

Finishing today's commentary on this currency pair, please note that most market participants expect the European Central Bank to announce fresh measures to fight deflation in the euro zone. If ECB cuts interest rates further (divergence in monetary policies) and intensify its asset purchase program, we could see a sharp drop in EUR/USD later in the day.

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 1.1512 and the initial downside target at 1.0572) are justified from the risk/reward perspective.


GBP/USD

GBP/USD Daily Chart
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Looking at the daily chart, we see that GBP/USD remains in the blue consolidation under the pink resistance line and the 50% Fibonacci retracement. Although the pair can go both or north and south from here, the current position of the indicators (a sell signal generated by the Stochastic Oscillator is still in play) suggests that another downswing in the coming days is more likely.

Are the any other factors that could support the realization of the above scenario? Let's examine the weekly chart and find out.

GBP/USD Weekly Chart
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From this perspective, we see that although GBP/USD moved higher earlier this week, the pair gave up some gains and slipped under the lower border of the blue consolidation, which looks like a verification of earlier breakdown. If this is the case, the exchange rate will extend declines in the coming week.

Having said the above, let's take a closer look at the long-term chart below.

GBP/USD Monthly Chart
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On the long-term chart, we see that GBP/USD rebounded and climbed to the horizontal resistance line based on the May 2010 lows, which suggests a verification of earlier breakdown and lower values of GBP/USD in near future. Therefore if the pair declines from the current levels, the first downside target would be around 1.4090, where the 38.2% Fibonacci retracement (based on the recent upward move) and the red horizontal support line are.

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 at the moment.


USD/CHF

USD/CHF Weekly Chart
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USD/CHF Daily Chart
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Looking at the above charts, we see that USD/CHF extended gains and re-tested the 61.8% Fibonacci retracement. With this move, the pair climbed slightly above the previous high, but as you see this improvement was only very temporary and the pair gave up some gains very quickly. As a result, the pair invalidated this small breakout, which in combination with the Fibonacci retracement and sell signals generated by the CCI and Stochastic Oscillator suggests further deterioration in the coming days. If this is the case and USD/CHF declines from here, the initial downside target would be the green support zone marked on the daily chart. Finishing today's alert, please keep in mind that as long as there is no invalidation of the breakdown under the blue resistance line another bigger upward move is questionable. Nevertheless, if we see such price action, we'll consider re-opening long positions.

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.

Thank you.

 


 

Nadia Simmons

Author: Nadia Simmons

Nadia Simmons
Sunshine Profits.com
Forex & Oil Trading Strategist
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Nadia Simmons

Nadia is a private investor and trader, dealing in currencies, commodities (mainly crude oil), and stocks. Using her background in technical analysis, she spends countless hours identifying market trends, major support and resistance zones, breakouts and failures. In her writing, she presents complex ideas with clarity that enables you to easily understand market changes, and profit on them. Nadia is the person behind Sunshine Profits' 3 premium trading services: Forex Trading Alerts, Oil Trading Alerts Alerts, and Oil Investment Updates.

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons's reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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Przemyslaw Radomski

Author: Przemyslaw Radomski

Przemyslaw Radomski, CFA
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Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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