Forex Trading Alert originally sent to subscribers on August 23, 2016, 9:09 AM.
Although today’s data showed that Germany’s manufacturing PMI declined to a two-month low of 53.6 and Germany’s services PMI dropped to a 15-month low of 53.3, missing analysts’ expectations, the euro moved higher against the greenback in the following hours. How did this increase affect the technical picture of the exchange rate?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the daily chart, we see that currency bulls pushed EUR/USD higher after our alert was posed, which invalidated the breakdown under the medium-term brown support line. This positive event triggered further improvement earlier today, which means that we may see a test of the last week’s high in the coming day(s). Nevertheless, we should keep in mind that the current position of the daily indicators suggests that lower values of the exchange rate are just around the corner. However, in our opinion such price action will be more likely if EUR/USD closes the day under the brown line.
Very short-term outlook: mixed
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
The overall situation in the very short term hasn’t changed much as USD/JPY remains in a consolidation around the 88.6% Fibonacci retracement based on the Jun-Jul upward move. Today, we’ll focus on the broader perspective.
On the weekly chart, we see that USD/JPY slipped under the blue support zone earlier this week. Although this is a negative signal, we saw similar price action in Jun and Jul, which suggests that the pair may reverse in the coming week – especially, when we factor in the proximity to the green support zone marked on the long-term chart below.
From this perspective, we see that even if the exchange rate moves lower from current levels, the space for declines seems limited as the lower border of the green zone and the 112.8% Fibonacci extension (around 97.60) are quite close. Nevertheless, as long as the barrier of 100 keeps declines in check, another attempt to move higher from this area is likely.
Very short-term outlook: mixed
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.
AUD/USD
Looking at the weekly chart, we see that although AUD/USD rebounded earlier this week, the long-term orange resistance line, the late-Apr high, the 70.7% Fibonacci retracement and the current position of the indicators continue to support currency bears, suggesting that even if the pair moves higher once again (and test the last week’s high) further deterioration is just around the corner.
Will the daily chart give us more bearish technical factors? Let’s focus on the very short-term chart and find out.
From today’s perspective, we see that although AUD/USD moved lower at the end of the previous week, currency bulls managed to stop their opponents, which resulted in a rebound earlier this week. Additionally, the CCI and Stochastic Oscillator generated buy signals, which suggests further improvement and a test of the upper border of the purple rising wedge (or even the blue resistance line based on the recent lows) in the coming week. However, such price action will be more likely if AUD/USD breaks above the orange resistance zone created by the Fibonacci retracement levels.
Very short-term outlook: mixed with bullish 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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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