Forex trading alert: Pound/U.S. Dollar—Breakout or fakeout?

 

 

USD/CHF

 

From the weekly perspective, we see that USD/CHF has been trading in the declining wedge since July. As you see on the above chart, the pair rebounded in March after a drop to the lower border of the formation, which resulted in further improvement and an increase to the upper line. However, this resistance stopped gains and triggered a decline that took the exchange rate below the lower border of the declining trend channel (marked with red). Despite this drop, the buyers didn’t give up and USD/CHF increased this week. Nevertheless, we should keep in mind that even if the exchange rate climbs higher, the space for further increases may be limited by the upper line of the declining wedge (currently around 0.8900).

 

Once we know the above, let’s take a closer look at the daily chart.

As you see on the above chart, the buyers managed to close the previous day above the lower border of the blue rising trend channel, which was a bullish signal. Although USD/CHF slipped below this support line, the pair reversed and rebounded earlier today. With this upswing, the exchange rate not only erased earlier losses, but also reached yesterday’s intraday high. As you see on the daily chart, this area is reinforced by the 38.2% Fibonacci retracement based on the recent decline. If it holds, we may see another attempt to move below the lower border of the trend channel. However, if it is broken, we will likely see further improvement and the first upside target will be around 0.8845, where the 50% Fibonacci retracement and the Apr.9 high are. If this level is broken, the next upside target will be slightly below the Apr.8 high, where the 61.8% Fibonacci retracement is (around 0.8872).

 

  • Very short-term outlook: bullish
  • 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.

 

AUD/USD

 

Quoting our last Forex Trading Alert:

(…) the pair still remains below the resistance zone created by the 70.7% Fibonacci retracement and the Nov.20 high. Additionally, the size of a corrective upswing is too small to say that we won’t see another attempt to move lower – especially when we factor in the current position of the indicators (sell signals remain in place and still favor sellers). As a reminder, if the exchange rate extends declines, we may see a pullback to the previously-broken upper line of the trend channel (…).

Looking at the above chart, we see that the exchange rate not only erased yesterday’s gains, but also dropped below an intraday low earlier today. As you see on the daily chart, sell signals remain in place, which suggests further deterioration and a pullback to the previously-broken upper line of the trend channel (currently around 0.9254).

 

  • Very short-term outlook: bearish
  • 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.

 

ALSO SEE:

Top 10 Reasons to Trade Forex 

<< Page 4 of 4
About the Author

Nadia is a private investor and trader, dealing in stocks, currencies, and commodities. 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.

You can read Nadia's analyses at SunshineProfits.com where she publishes her articles on gold and crude oil trading.

Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome