Earlier today, the U.S. Department of Labor showed that the initial jobless claims in the week ending December 12 fell by 6,000 to 289,000 beating analysts' expectations for an increase of 1,000. These bullish numbers supported the greenback and pushed USD/CHF to a fresh 2014 high. Will we see further rally?
In our opinion, the following forex trading positions are justified - summary:
EUR/USD: none
GBP/USD: none
USD/JPY: none
USD/CAD: none
USD/CHF: none
AUD/USD: none
EUR/USD
The situation in the medium- and short-term has deteriorated as EUR/USD reversed and declined, invalidating the breakout above the resistance zone (created by the 38.2% Fibonacci retracement based on the Oct-Dec decline, the barrier of 1.2500, the Dec high and the 50-day moving average) and the blue declining line. These strong bearish signals in combination with a breakdown below the lower border of the consolidation (marked with blue) suggests that the exchange rate will test the strength of the recent low in the coming day (or days). Please note that this scenario is currently reinforced by sell signals generated by the indicators.
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
Trading position (short-term): In 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/CAD
In our last commentary on this currency pair, we wrote:
The first thing that catches the eye on the above chart is a breakout above the upper line of the rising wedge (marked with blue). This is a bullish signal, which suggests that we could see an increase to the 61.8% Fibonacci retracement (around 1.1649). At this point, it's worth noting that slightly above this level is also the Jul 2009 high, which reinforces this area.
As you see on the above chart, the situation developed in line with the above-mentioned scenario as USD/CAD reached our upside target. What's next? Let's examine the daily chart and look for more clues about future moves.
Quoting our Friday's Forex Trading Alert:
(...) USD/CAD extended gains and hit a fresh 2014 high, breaking above the upper line of the very short-term rising wedge (market with blue dashed lines). This is a bullish signal, which suggests further improvement to around 1.1603, where the red resistance line (based on the Oct and Nov highs) and the 150% Fibonacci extension are.
From this perspective, we see that currency bulls pushed the exchange rate higher as we expected. Despite this improvement, the above-mentioned resistance area paused further rally, triggering a pullback. With this downswing, the pair declined, invalidating earlier breakout, which is a bearish signal that suggests lower values of the exchange rate (especially when we factor in sell signals generated by the indicators). Nevertheless, we think that further declines will be more likely if USD/CAD breaks below the lower border of the consolidation (marked with blue) at 1.1547.
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
On Tuesday, we wrote the following:
(...) USD/CHF broke below the lower order of the consolidation (...) which triggered a sharp pullback that took the pair to the (...) long-term red line. Several times in the previous month, this key support line stopped further deterioration, which translated to rebound and a fresh 2014 high. Taking this fact into account and combining it with the current position of the indicators, it seems to us that currency bulls will try to push the exchange rate higher.
Looking at the charts, we see that the situation developed in tune with the above-mentioned scenario. As you see, the long-term red line withstood the selling pressure, which resulted in a sharp corrective upswing that took the exchange rate to the upper line of the rising wedge (marked with brown) and the orange resistance zone (marked on the weekly chart). At the beginning of the month the combination of these levels stopped the rally, triggering a correction. Taking this fact into account, it seems to us that we could see a similar price action in the coming days. If this is the case, we'll see a drop to the lower border of the rising wedge (currently around 0.9739).
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
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.
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