Forex Trading Alert: EUR/USD - Another Invalidation of Breakout

By: Nadia Simmons & Przemyslaw Radomski | Tue, Apr 4, 2017
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Forex Trading Alert originally published on April 3, 2017, 8:16 AM


 

On Friday, the euro extended losses against the greenback and closed the week under the previously broken long-term support/resistance line, invalidating the earlier breakout. Will this negative development encourage currency bears to act in the coming week?

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

EUR/USD: short (a stop-loss order at 1.0967; the initial downside target at 1.0521)
GBP/USD: short (a stop-loss order at 1.2738; the downside target at 1.2157)
USD/JPY: none
USD/CAD: none
USD/CHF: long (a stop-loss order at 0.9708; the upside target at 1.0145)
AUD/USD: short (a stop-loss order at 0.7873; the initial downside target at 0.7498)

 


EUR/USD

EUR/USD Monthly Chart
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EUR/USD Weekly Chart
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The first thing that catches the eye on the weekly chart is an invalidation of the earlier breakout above the long-term red support/resistance line based on the March 2015 and November 2015 lows, which is a bearish development.  Additionally, the CCI and the Stochastic Oscillator generated the sell signals, increasing the probability of further declines.

How did this drop affect the very short-term picture? Let’s check.

EUR/USD Daily Chart
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On Friday, we wrote the following:

(...) taking into account the size of yesterday’s strong bearish candlestick, the sell signals generated by the daily indicators (and the weekly CCI) and the fact that the pair remains under the long-term green resistance line based on the September 2000 and July 2001 lows marked on the chart below (in other words, an invalidation of the breakout and its negative impact on the exchange rate is still in effect), we think that further deterioration 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 closed Friday’s session under the red support/resistance line. Earlier today, the exchange rate moved a bit higher but then reversed and declined, which looks like a verification of the Friday’s breakdown.

Taking this fact and the long- and medium-term pictures into account, we think that lower values of EUR/USD are more likely than not. Therefore, if the pair extends losses, we’ll see a realization of the Friday’s scenario:

(...) If (...) EUR/USD declined below this line, invalidating the earlier breakout, it will be a bearish development, which will likely accelerate declines. Therefore, if we see such price action, the initial downside target for currency bears will be around 1.0521 (slightly above the late February and March lows).

Very short-term outlook:  bearish
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short (already profitable) positions (with a stop-loss order at 1.0967 and the initial downside target at 1.0521) are justified from the risk/reward perspective.


USD/JPY

USD/JPY Weekly Chart
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USD/JPY Daily Chart
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On the daily chart, we see that although USD/JPY broke above the green zone and the February lows, the 38.2% Fibonacci retracement encouraged currency bears to act. As a result, the exchange rate reversed and declined, invalidating the earlier breakout. Additionally, the Stochastic Oscillator generated the sell signal, which suggests another attempt to move lower in the coming day(s). If this is the case and we see such price action we’ll likely see a drop to 110.92 or even a test of the recent lows in the coming week.

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.


AUD/USD

AUD/USD Weekly Chart
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AUD/USD Daily Chart
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Quoting our Thursday’s alert:

(...) although AUD/USD moved a bit higher in the previous days, it is still trading under the previously-broken lower border of the red rising trend channel, which suggests that this upswing may be just a verification of the earlier breakdown. If this is the case, it will be a negative signal, which will likely translate into a decline.

From today’s point of view, we see that the situation developed in line with the above scenario and AUD/USD extended declines, which erased almost all the last week’s rebound. Additionally, the sell signal generated by the Stochastic Oscillator remains in place, supporting currency bears and another downswing. If this is the case, and the exchange rate drops under 0.7585, we’ll see a test of the green support zone in the following days.

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 0.7873 and the initial downside target at 0.7498) are justified from the risk/reward perspective.

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
Founder, Editor-in-chief
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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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