Yesterday, AUD/USD invalidated the breakdown under the lower border of the trend channel, which triggered a reversal and rebound. How high could the exchange rate go in the coming days?

In our opinion the following forex trading positions are justified - summary:

• EUR/USD: short (a stop-loss order at 1.2250; the initial downside target at 1.1466)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the daily chart, we see that although EUR/USD extended yesterday gains, the pair remains under the upper border of the brown rising trend channel. This suggests that we may see another verification of the earlier breakdown below this resistance in the very near future. If this is the case, the pair will reverse and decline from current levels, which will likely translate into a drop to the lower border of the brown trend channel.

This scenario is also reinforced by the wider picture of the exchange rate.

On the long-term chart, we see that EUR/USD is still trading in the orange resistance zone. Additionally, indicators increased to the highest levels since April 2014. Back then, such high readings of the CCI and Stochastic Oscillator preceded bigger move to the downside, which suggests that we may see a similar price action in the coming week(s).

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1466) 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

Quoting our Wednesday alert:

(…) the pair invalidated the earlier breakdown below the long-term green line based on the April and June lows, which suggests further improvement in the coming days – especially if currency bulls push USD/JPY above the red declining resistance line based on the previous highs. If we see such price action, the next upside target will be the yellow resistance zone seen on the daily chart.

From today’s point of view, we see that currency bulls pushed USD/JPY higher as we had expected. Thanks to today’s sharp increase, the exchange rate invalidated the breakdown below the red declining line based on the previous highs, which triggered an upswing to the yellow resistance zone.

What’s next for USD/JPY? Taking into account the fact that the above-mentioned resistance zone stopped currency bulls many times in the previous weeks and combining it with the current position of the daily indicators (the CCI and the Stochastic Oscillator), we think that reversal and a pullback should not surprise us in the coming week. If this is the case and the pair moves lower, the initial downside target will be today low and the 50% Fibonacci retracement based on the recent rebound (around 109.31- of 109.54).

Very short-term outlook: mixed with bearish 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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

In our last commentary on this currency pair we wrote:

(…) Although the pair increased slightly earlier today, the sell signals generated by the daily indicators remain in place, supporting another attempt to move lower. If we see such price action, the pair will test the lower border of the purple rising trend channel in the very near future.

On the daily chart, we see that the situation developed in line with the above scenario and AUD/USD slipped to our first downside target. As you see, this support triggered a rebound, which together with the buy signal generated by the Stochastic Oscillator suggests that we may see an increase even to the recent high in the coming week.

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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