Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

EUR/USD - Time for Rebound?

Currencies / Euro Aug 05, 2014 - 06:14 AM GMT

By: Nadia_Simmons

Currencies

On Friday, the common currency rebounded sharply after disappointing U.S. employment data, which showed that the U.S. economy added 209,000 jobs in July, missing expectations for an increase of 233,000. As a result, EUR/USD erased over 20% of recent declines and came back above 1.3400. Will currency bulls manage to push the pair higher?


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

In our Forex Trading Alert posted on July 23, we wrote the following:

(...) we may see a drop even to around 1.3320, where the size of the downswing will correspond to the height of the consolidation.

Please keep in mind that before currency bears will be able to realize the above-mentioned scenario, they will have to break below the 50% Fibonacci retracement level (around 1.3367), which serves as the nearest medium-term support at the moment.

Looking at the above chart, we see that the situation in the medium term has deteriorated in the previous week as EUR/USD extended losses and reached our initial downside target. As you see, this support level triggered a corrective upswing, but the size of the move is too small at the moment to say that the medium-term outlook has improved. Therefore, as long as the exchange rate remains below the last week's high another test of the strength of the 50% Fibonacci retracement and attempt to reach the next downside target can't be ruled out.

Having say that, let's check where the very short-term changes.

Quoting our Forex Trading Alert posted on Tuesday:

(...) the pair will drop to around 1.3335-1.3368, where the very strong support zone (created by the 50% Fibonacci retracement, the 200% Fibonacci extension based on the Apr-May increase, the 127.2% Fibonacci extension based on the entire Feb-Ma rally and the medium-term green support line) is. (...) we should keep an eye on the current EUR/USD moves as the position of the indicators suggests that a pause or corrective upswing is just around the corner (on the short-term basis).

It turned out that our projections were correct. On the above chart, we see that although the green support zone encouraged forex traders to push the buy button and triggered a sharp corrective upswing on Friday, this move erased only 23,6% of the entire decline that we saw in July. Therefore, we think that it's too early to say that the very short-term outlook has improvement. As you see on the above chart, recent days have formed a consolidation. If the pair breaks above the upper border of the formation, we'll see further improvement and an increase to at least February lows (around 1.3476-1.3483). On the other hand, if the exchange rate moves below Friday's low, EUR/USD will test the strength of the green support zone.

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

Trading position (short-term): So far, we noticed only one-day rally and a small consolidation, which didn't change the short-term picture. Nevertheless, it's quite likely that a local bottom is materializing right now as EUR/USD reached an important support zone (and also our downside price target), which may translate to a bigger corrective upswing. Therefore, we think that cashing out of the short positions (opened on July 16 at 1.3523) and taking profits off the table seems to be appropriate.

GBP/USD

In our Forex Trading Alert, posted on July 24, we wrote:

(...) the exchange rate also dropped below the key support line created by the 2009 high, which is a bearish signal that suggests further deterioration. If the pair doesn't invalidate the breakdown, we'll see a drop to at least 1.6875, where the next horizontal support line (based on the Nov 2009 high) is.

As you see on the above chart, the situation developed in line with the above-mentioned scenario as GBP/USD declined below its initial target in the previous week. With this downswing, the exchange rate also dropped under the lower border of the rising wedge, which is an additional bearish signal that suggests further deterioration. If this is the case, the next downside target will be the support zone created by the May and June lows (around 1.6692-1.6766).

Are there any short-term support levels that could stop currency bears? Let's check.

In our commentary posted on July 18, we wrote:

(...) So, where the pair head next? In our opinion, (...) the next move will be to the downside. As you see on the above chart, if the pair breaks below the lower border of the consolidation, the nearest downside target will be the 2009 high, and the next - the medium-term orange line. Please note that only if the pair breaks below these lines, we'll see a correction to around June 18 low, where the size of a pullback will correspond to the height of the formation.

As you can see on the above chart, our projections were correct. The currency bears not only realized the above-mentioned scenario, but also managed to push the pair lower - to the support zone created by the 76.4% and 78.6% Fibonacci retracement levels based on the May-July rally. Based on our experience, we believe that this is very important area, because in many cases in the past (and not only on the currency market) this zone managed to pause or even stop further deterioration. Therefore, if history repeats itself, we'll see a corrective upswing to around 1.6917 (the June 18 low) in the coming day (or days). Nevertheless, if it is broken, the exchange rate, will extend declines and drop to 1.6753 or even to the May low of 1.6691.

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

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

USD/CHF

Quoting our Forex Trading Alert posted on July 25:

(...) taking into account the current position of the indicators (which still have space for further growths), it seems that the exchange rate will move higher and reach its next upside target (around 0.9091), which corresponds to the height of the trend channel.

As you see on the above chart, the situation in the medium term has improved in the previous week as we expected. On the weekly chart, we see that USD/CHF extended rally and reached its upside target, but then gave up some gains. Despite this small drop, the pair is still trading near last week's high, which suggests that currency bulls may try to push the exchange rate higher - to the 38.2% Fibonacci retracement based on the entire May 2013-March 2014 decline (this area is also reinforced by the long-term declining resistance line, which will likely stop further improvement). Nevertheless, we should keep an eye on the current USD/CHF moves because the position of the indicators suggests that correction in the coming week (or weeks) is quite likely.

Are there any short-term factors that could stop further improvement? Let's check.

On July 25, we wrote:

(...) it seems that there is nothing that could stop currency bulls before a test of the strength of the resistance zone created by the 112.8% Fibonacci extension and the declining resistance line (marked with orange and based on the May and July 2013 highs).

In our last commentary on this currency pair we added:

(...) USD/CHF reached our upside target. (...) if currency bulls manage to push the pair higher, the next upside target will be at 0.9083 (the 127.2% Fibonacci extension) or even around 0.9109, where the upper line of the rising trend channel (marked with purple) intersects the 141.4% Fibonacci extension.

From this perspective, we see that currency bulls realized the above-mentioned scenario, just as we expected - the exchange rate broke above the 127.2% Fibonacci extension and approach the upper line of the rising trend channel last week. The proximity to this strong resistance encouraged forex traders to push the sell button, which resulted in a pullback to the previously-broken orange support/resistance line. So far, it holds, which means that we may see another attempt to break above the upper border of the trend channel in the near future. However, taking into account sell signals generated by the indicators, we should also consider a bearish scenario, which suggests a drop below the nearest support and correction to at least Friday's low of 0.9039.

Very short-term outlook: mixed Short-term outlook: mixed 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.

Thank you.

Nadia Simmons

Sunshine Profits‘ Contributing Author

Oil Investment Updates
Oil Trading Alerts

* * * * *

Disclaimer

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’ 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules