Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
Is A Sharp Stock Market Crash Ahead? - 21st Nov 18
Have We Seen The Worst of the Gold Bubble Burst? - 21st Nov 18
The Real Price of LNG, Climate Change, Coming Fracking Environmental Disaster - 21st Nov 18
Powell and Gold between Inflation and Global Slowdown - 21st Nov 18
Why is the North American Wilderness Known for Spiritualism? - 21st Nov 18
Stock Market Buy the Dip is Dead - 20th Nov 18
Deep State Mad World - 20th Nov 18
Commodities - What Do You Need To Know? - 20th Nov 18
Precious Metals Moving In Unison For A Massive Price Advance - 20th Nov 18
Handicapping the Precious Metals Through Year-End - 20th Nov 18
Betting Markets Confirm Theresa May Safe From Tory Leadership Challenge this Week - 20th Nov 18
Rail Chaos Transpennine Express Cancels Services to Manchester Airport Whilst on the Train! - 20th Nov 18
The Giants Are Coming...Giants of The Internet! - 20th Nov 18
Gold & Silver Corrective Rally is Almost Over - 19th Nov 18
Stock Market Going Sideways - Which Direction is Next? - 19th Nov 18
Technical Analysis Points to DOW 30k Next Target - 19th Nov 18
Stock Market Consolidating in a Downtrend  - 19th Nov 18
Next Tory Leader, Prime Minister Forecast and Betting Market Odds - 18th Nov 18
The Fed's Misleading Money Supply Measures - 17th Nov 18
Stock Market Outlook: Why the Economy is Bullish for Stocks Going into 2019 - 17th Nov 18
NO DEAL HARD BrExit Tory Chaos, Theresa May Leadership Challenge - 17th Nov 18
Gold vs Several Key Investments - 17th Nov 18
GDX Gold Mining Stocks Q3 18 Fundamentals - 17th Nov 18
Is Gold Under or Overpriced? - 17th Nov 18
Active Managers are Bearish on Stocks. A Bullish Contrarian Sign - 16th Nov 18
Will The Fed Sacrifice Retirement Portfolio Values For The "Common Good"? - 16th Nov 18
BrExit War - Tory Party About to Replace Theresa May for NO DEAL BrExit - 16th Nov 18
Aspire Global Makes Significant Financial Strides - 16th Nov 18
Gold Oil and Commodities …Back to the Future ? - 16th Nov 18
Will Oil Price Crash Lead to “Contagion” for the U.S. Stock Market? - 15th Nov 18
How NOT to Be Among the MANY Stock Investors Fooled by This Market Myth - 15th Nov 18
Tory BrExit Chaos Cripples UK Economy, Wrecks Housing Market Confidence - 15th Nov 18
Stocks Could End 2018 With A Dramatic Rally - 15th Nov 18
What Could Be the Last Nail in This Stock Bull Markets Coffin - 15th Nov 18
Defensive Stock Sectors Outperforming, Just Like During the Dot-com Bubble - 15th Nov 18
Buying Your First Home? Here’s How to Save Money - 15th Nov 18
US Economy Ten Points or Ten Miles to ‘Bridge Out’? - 14th Nov 18
US Stocks: Whither from Here? - 14th Nov 18
Know exactly when to Enter&Exit trades using this... - 14th Nov 18
Understanding the Benefits of Keeping a Trading Journal - 14th Nov 18
S&P 500 Below 2,800 Again, New Downtrend or Just Correction? - 13th Nov 18
Warning: Precious Metals’ Gold and Silver Prices are about to Collapse! - 13th Nov 18
Why the End of the Longest Crude Oil Bull Market Since 2008? - 13th Nov 18
Stock Market Counter-trend Rally Reaches .618 Retracement - 13th Nov 18
How to Create the Best Website Content and Generate Organic Traffic - 13th Nov 18
Why the Stock Market Will Pullback, Rally, and Roll Into a Bear Market - 13th Nov 18
Stock Markets Around the World are Crashing. What Not to Worry About? - 12th Nov 18
Cyclical Commodities Continue to Weaken, Gold Moves in Relation - 12th Nov 18
Olympus Tough TG-5 Camera Stuck or Dead Pixels, Rubbish Video Auto Focus - 12th Nov 18
5 Things That Precede Gold Price Major Bottoms - 12th Nov 18
Big US Stocks Q3 Fundamentals - 12th Nov 18
How "Free Money" Helped Create Sizzling Housing Market & REIT Gains - 12th Nov 18
One Direction More Likely for Bitcoin Price - 12th Nov 18
The Place of HSE Software in Today's Business - 12th Nov 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

USD/CAD – Happy and Profitable Bears, EUR/USD – Breakdowns and Their Implications

Currencies / Forex Trading Apr 05, 2018 - 12:52 PM GMT

By: Nadia_Simmons

Currencies

Yesterday, the U.S. dollar moved sharply lower against its Canadian counterpart, which took the exchange rate to our next downside target. Thanks to the seller’s attack, we noticed a potential pro-bearish formation on the horizon, which can make positions even more profitable…


EUR/USD – Breakdowns and Their Implications

Yesterday, we wrote that although EUR/USD came back above the previously-broken upper border of the black declining trend channel, the pair is still trading inside the green consolidation slightly below the 23.6% Fibonacci retracement.

What does it mean for the exchange rate? In our opinion, as long as there is no daily closure above the upper line of the formation and the black support/resistance line another move to the downside and a test of the green support zone is likely.

From today’s point of view, we see that currency bears didn’t disappoint us and pushed EUR/USD lower, invalidating the earlier tiny breakout above the upper border of the black declining trend channel during Tuesday’s session.

Thanks to yesterday’s drop the pair also closed the day under the lower line of the green consolidation and the lower border of the blue rising trend channel (not only in terms of intraday lows, but also in terms of daily openings), which doesn’t bode well for currency bulls – even if we factor in the fact that the daily indicators are oversold (as a reminder, they have lied many times in the past).

What’s Next for the Exchange Rate?

Taking all the above into account, we think that the pair will test not only the medium-term support line based on the November and December 2017 lows, but also the 38.2% Fibonacci retracement and the green support zone in the coming day(s).

USD/JPY vs. Short-term Resistance


Looking at the weekly chart, we see that although USD/JPY pulled back in the previous week, currency bulls didn’t give up and try to push the pair higher this week. The buy signals generated by the indicators suggest further improvement, but will we see a bigger move to the upside?


In our opinion, such price action will be more likely only if USD/JPY breaks above the upper border of the purple declining trend channel. Nevertheless, in our opinion, further rally will be more reliable if the exchange rate climbs above late February high of 107.88 and invalidates the earlier breakdown under the red horizontal line based on the September low of 107.30.

Until this time, short-lived moves in both directions should not surprise us. Therefore, waiting at the sidelines for another opportunity remains the best decision.

USD/CAD Rewards Bears

Looking at the medium-term chart, we see that although USD/CAD moved a bit higher earlier this week, currency bears took control quite quickly, which resulted in another move to the downside. Additionally, the sell signals generated by the weekly indicators remain in the cards, supporting currency bears and lower values of the exchange rate.

Are there any short-term factors that could thwart these plans?

Before we answer to this question, let’s recall the quote from our last commentary on this currency pair:

(…) although UD/CAD bounced off the blue support zone, the pair is still trading in the green consolidation around the yellow resistance zone and well below the previously-broken lower border of the green rising trend channel.

What does it mean for the exchange rate? In our opinion, as long as the pair remains under the upper border of the formation, another attempt to move lower is very likely.

If this is the case and USD/CAD extends losses from here, we’ll see (at least) a re-test of the blue support zone in the coming days, which will make our short positions even more profitable (as a reminder, we opened them on March 19, when USD/CAD was trading at around 1.3116).

As you see on the daily chart, the situation developed in tune with our assumptions and USD/CAD declined sharply after unsuccessful attempt to break above the upper border of the green consolidation. Thanks to yesterday’s downswing, the pair dropped under the lower line of this formation and reached our next downside target - the blue support zone and the 38.2% Fibonacci retracement.

Although this support area could trigger a rebound, the sell signals generated by the indicators remain in the cards, which together with yesterday’s breakdown suggest further deterioration and a drop to around 1.2709, where the size of the move will correspond to the height of the green consolidation.

And speaking about the bearish potential… Looking at the daily chart, you probably already noticed a potential head and shoulders formation. You're right, the right arm of the pattern doesn’t look perfectly like in technical analysis books, but yesterday’s downswing took the exchange rate under the neck line of the formation, increasing the probability of a bigger move to the downside. Nevertheless, in our opinion, such price action will be more likely and reliable if USD/CAD falls below the blue support zone. In this case, the likelihood of a decline under the above-mentioned downside target will increase significantly.

So, how low could the exchange rate go if the situation develops in line with the pro-bearish scenario?

In our opinion, the next downside target will be around 1. 2506, where the size of the downward move will correspond to the height of the head and shoulders formation. Nevertheless, before we see the pair at this level, currency bears will have to break under 50% and 61.8% Fibonacci retracements first. Therefore, we will continue to monitor the market and keep our subscribers informed should we see a confirmation/invalidation of the above.

USD/CHF Between Important Lines

Looking at the medium-term chart, we see that USD/CHF is still trading above the previously-broken resistance zone created by the upper line of the orange declining trend channel, the lower border of the blue declining trend channel and the 38.2% Fibonacci retracement. Although this is a bullish signal, we noticed some disturbing factors on the horizon, which could thwart these plans.

What do we mean by that? First, the exchange rate moved higher earlier this week, but currency bulls didn’t manage to push it above the 50% Fibonacci retracement, which resulted in a pullback. Second, the weekly Stochastic Oscillator generated the sell signal. Third, thanks to yesterday’s increase the pair climbed to the previously-broken lower border of the blue rising trend channel, but there was no breakout above it, which suggests that this move could be a verification of the earlier breakdown.

Additionally, the current position of the daily indicators suggests the next move will be likely to the downside as the generation of sales signals is just around the corner. If this is the case, the pair could decline to the previously-broken red declining line (which serves as the nearest support) or even to the pink support line based on the previous lows, which intersects the yellow support zone now.

What’s New in the USD Index?

Finishing today’s Forex Trading Alert, we decided to take a closer look at the current situation in the USD Index.

From the short-term point of view, we see that the greenback came back above two important resistance lines – the previously-broken lower border of the black declining trend channel and the upper line of he blue declining wedge.

Yesterday, the index verified this breakout, which together with the buy signals generated by the indicators suggest further improvement.

How high could the U.S. dollar go in the coming day(s)?

In our opinion, the first upside target will be around 90.77, where the 38.2% Fibonacci retracement and the March peak are. Additionally, in this area the size of the upward move will correspond to the height of the rising wedge (we marked it with the green ellipse), which increases the probability of the pro-bullish scenario in near future.

If this is the case and the index climbs to our first upside target, we’ll also see a realization of the bearish scenario in the case of EUR/USD as the exchange rate will test the March low and our downside target at 1.2173.

If you enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Oil Trading Alerts as well as Gold & Silver Trading Alerts. Sign up now.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski
Founder, Editor-in-chief

Sunshine Profits: Gold & Silver, Forex, Bitcoin, Crude Oil & Stocks
Stay updated: sign up for our free mailing list today

* * * * *

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.


© 2005-2018 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