Forex Trading Alert: EUR/USD - At Crossroads

By: Nadia Simmons & Przemyslaw Radomski | Wed, Jul 9, 2014
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Forex Trading Alert originally published on July 9, 2014, 4:52 PM


 

The common currency moved higher against the U.S. dollar after the Federal Reserve said in the minutes of the monetary policy meeting that its stimulus program should end likely in October. As a result, EUR/USD increased to a very important resistance area. What could happen if it stopped currency bulls' charge?

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 term hasn't changed much as EUR/USD still remains in the consolidation below the long-term resistance line. Today, we'll take a closer look at the very short-term changes.

EUR/USD Daily Chart
Larger Image

The first thing that catches the eye on the daily chart is a potential head and shoulders reversal formation. Although it's not complete at the moment, we think that the pair is currently building the right shoulder of this pattern. If this is the case and EUR/USD declines from here, we'll see a correction to the neck line based on the June 26 and July 7 lows (but further deterioration will be even more likely if the pair drops below the green support zone). If this area is broken, the exchange rate will test the strength of the June lows, where the size of a downswing will correspond to the height of the formation (this scenario is currently reinforced by the strong resistance zone created by the 50- and 200-day moving averages).

Nevertheless, we should keep in mind that buy signals remain in place, which suggests that currency bulls may test the strength of the previously-broken lower border of the rising trend channel. If it holds, we'll see a realization of the above-mentioned scenario, however, if this resistance is broken, we'll see further improvement and the initial upside target will be the 38.2% Fibonacci retracement (around 1.3688). In this case, the bearish formation and the breakdown will be invalidated (a very strong bullish signal), which will likely trigger an increase to the next Fibonacci retracement.

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

Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment.


USD/CHF

USD/CHF Weekly Chart
Larger Image

From this perspective, we see that although USD/CHF rebounded in the previous week, the resistance zone created by the March high and the 23.6% Fibonacci retracement stopped further improvement, triggering another downswing. Taking this fact into account and combining it with sell signals generated by the CCI and Stochastic Oscillator, we think that the pair will test last's week low in the nearest future.

Will the short-term picture confirm this bearish scenario?

USD/CHF Daily Chart
Larger Image

Looking at the above chart, we see that USD/CHF bounced off the 50% Fibonacci retracement level, which triggered a corrective upswing that took the exchange rate to the higher brown line, which is also the upper border of the declining trend channel. As you see on the daily chart, this resistance encouraged forex traders to push the sell button and resulted in a pullback. Additionally, the RSI and CCI moved lower, while the Stochastic Oscillator generated sell signal, which suggest that we'll see further deterioration and a correction to the recent lows (or even to the lower border of the trend channel, if the nearest support area is broken).

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed with bullish bias
LT outlook: bearish

Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment.


AUD/USD

Today, we'll focus on the daily chart.

AUD/USD Daily Chart
Larger Image

Earlier today, AUD/USD rebounded and reached the previously-broken lower border of the rising wedge. Despite this improvement, the resistance line in combination with the 50% Fibonacci retracement still holds, therefore, our last commentary on this currency pair is still up-to-date:

(...) If this resistance area holds, we'll see further deterioration and a comeback to the green support line. However, taking into account the current position of the indicators, it seems to us that we'll see another attempt to move higher. If this is the case and the pair breaks above the lower blue line, the next upside target will be around 0.9452, where the upper line of the formation intersects with the 70.7% Fibonacci retracement (based on the recent decline).

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

Trading position (short-term): In 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.

Copyright © 2013-2014 Sunshine Profits

Przemyslaw Radomski

Author: Przemyslaw Radomski

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website - SunshineProfits.com

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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