Forex Trading Alert originally published on Mar 20, 2014, 4:41 PM
The U.S. dollar moved higher against major currency pairs after better-than-expected initial jobless claims data. Earlier today, the Department of Labor showed in its report that initial claims for jobless benefits in the week ending March 15 rose by 5,000 to 320,000 from the previous week's total of 315,000 000, while analysts had expected an increase of 10,000. What impact did it have on major currency pairs? What is their current outlook? If you want to know our take on this question, we invite you to read our today's Forex Trading Alert.
In our opinion the following forex trading positions are justified - summary:
EUR/USD: none; however in our opinion it's a good idea to automatically re-open the short position (i.e. by placing a pending limit order at this time), if the pair drops below 1.3748 (with the following stop-loss order: 1.3845)
GBP/USD: none
USD/JPY: none
USD/CAD: none
USD/CHF: none
AUD/USD: short (stop-loss order: 0.9166 and the initial price target: 0.8955)
EUR/USD
Looking at the above chart, we see that EUR/USD broke below the lower border of the consolidation range and declined below the 38.2% Fibonacci retracement (based on the recent rally), reaching the 50-day moving average. Earlier today, this support line encouraged buyers to act, which resulted in a small corrective upswing. However, despite this increase, the exchange rate still remains below the short-term green support line (which serves as resistance at the moment). Taking this fact into account and combining it with the size of the current decline and the position of the indicators, it seems that further deterioration is likely to be seen in the coming days.
Before we summarize this currency pair, let's take a look at the 4-hour chart.
Quoting our last Forex Trading Alert:
(...) EUR/USD declined below the upper line of the rising trend channel. Additionally, the current position of the indicator favors sellers, which suggests that we may see another attempt to move lower in the following hours. The first downside target is the 23.6% Fibonacci retracement level. If it is broken, we may see a drop to the 38.2% retracement or even to the lower border of the trend channel (currently around 1.3753).
From this perspective, we see that the sellers realized this bearish scenario and pushed the exchange to the lower border of the trend channel earlier today. Earlier today, this support line encouraged buyers to act, which resulted in a small corrective upswing in the following hours. Taking this fact into account, it seems that we may see further improvement - especially if the indicators (which are oversold) generate buy signals. In this case, the upside target for buyers will be the 38.2% Fibonacci retracement based on the recent decline, which corresponds to the March 11 low.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed
LT outlook: bearish
Trading position (our opinion): If you want to hold your short position for days or weeks, it doesn't seem that the current move higher changes the short-term outlook - (even if EUR/USD climbs to 1.3833). However, if you are a daytrader and your short position is intended to be kept only for hours (not days), then you might want to close this position and take profits off the table. Please note that if the exchange rate declines below today's low (1.3748) and the 50-day moving average (currently at 1.3755), it will be justified to re-enter short position.
GBP/USD
Looking at the daily chart, we see that the very short-term situation has deteriorated as GBP/USD declined below the green support line based on recent lows. On top f that, the exchange rate also slipped below the medium-term rising support line based on the July and February lows (also marked with green), which is a bearish signal. As you see on the daily chart, with this downswing, the pair approached the 61.8% Fibonacci retracement (based on the recent rally). If the proximity to this support level encourages buyers to act, we may see a corrective upswing in the coming day (or days). However, if the exchange rate extends losses and breaks below this retracement, we will likely see a drop to the lower border of the rising trend channel (marked with orange).
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment. However, if the pair drops below the lower border of the rising trend channel, we consider opening short positions.
USD/JPY
Quoting our last Forex Trading Alert:
(...) If the buyers do not give up, we may see further improvement (similarly to what we saw on Monday) and the initial upside target will be yesterday's high, which corresponds to the 23.6% Fibonacci retracement based on the entire recent decline. If this resistance level is broken (which is quite possible when we factor in the current position of the indicators), we may see an increase to the 38.2% Fibonacci retracement (which corresponds to the red declining resistance line at the moment).
Looking at the above chart, we see that the buyers realized this pro growth scenario yesterday as the exchange rate reached the 38.2% Fibonacci retracement and the red declining resistance line. As you see on the daily chart, this strong resistance decelerated further improvement earlier today. If the buyers do not manage to push the pair higher, we may see a pullback in the near future. Nevertheless, buy signals generated by the indicators still support buyers, suggesting that we may see another attempt to move higher.
To have a more complete picture of the current situation, let's take a look at the 4-hour chart.
From this perspective, we see that the recent candlesticks have formed a consolidation. If the exchange rate moves higher (and breaks above the declining resistance line and the 50% Fibonacci retracement based on the recent decline), we will likely see an increase to around 102.84, where the March 7 low is. However, taking into account the current position of the indicators, it seems that we may see a pullback in the following hours. If this is the case, the first downside target will be the previously-broken 38.2% retracement. If it is broken, we will likely see a drop even to around 101.93.
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment.
USD/CAD
Looking at the above chart, we see that USD/CAD extended gains and hit a fresh 2014 high. With this upswing, the pair also broke above the 50% Fibonacci retracement level, which is a bullish sign. Taking this fact into account, it seems that the next upside target for the buyers will be the upper line of the rising trend channel. Nevertheless, we should keep in mind that the RSI approached the level of 70, while the CCI is overbought and the Stochastic Oscillator approached the level of 80, which suggests that we may see a pause in the coming day (or days).
Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): In our opinion, the space for further growth seems limited, so opening long positions at the moment is not a good idea from the risk/reward perspective.
USD/CHF
Looking at the above chart, we see that USD/CHF broke above the upper line of the consolidation range (created by last Thursday high) yesterday and climbed to its upside target - the upper line of the declining wedge/trend channel (marked with brown) earlier today. With this upward move, the exchange rate also reached the 38.2% Fibonacci retracement level based on the recent decline. As you see on the daily chart, this resistance level encouraged sellers to act, which resulted in a drop below the upper line of the declining wedge/trend channel in the following hours, which is not a positive sign that suggests that we may see a pullback in the coming day (or days). If this is the case, the first downside target will be the previously-broken upper line of the consolidation (around 0.8764).
Very short-term outlook: mixed
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish
Trading position (short-term): In our opinion, the situation is not enough bullish to go long at the moment.
AUD/USD
Looking at the above chart, we see that AUD/USD extended losses and declined to its initial downside target - the 23.6% Fibonacci retracement (based on the recent rally) yesterday. Earlier today, the exchange rate declined once again approaching the March 13 low. As you see on the daily chart, this support level encouraged buyers to act, which resulted in an corrective upswing. Despite this increase, AUD/USD still remains below an important resistance zone created by the green resistance line and the 2014 high. Additionally, sell signals generated by the indicators are still in play and support sellers.
Very short-term outlook: mixed
Short-term outlook: bullish
MT outlook: bearish
LT outlook: bearish
Trading position (short-term; our opinion): Short. Stop-loss order: 0.9166 and the initial price target: 0.8955. The above is not an investment / trading advice and please note that trading (especially using leveraged instruments such as futures or on the forex market) involves risk.
Thank you.
