Earlier today, official data showed that average cash earnings in Japan rose 0.6%, beating analysts’ forecasts. Despite these numbers, Friday’s bullish data continued to support the greenback, which pushed USD/JPY to important resistance area. Will it be strong enough to stop the rally?

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

• EUR/USD: short (stop-loss order at 1.1476; initial downside target around 1.0462)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the charts, we see that although EUR/USD moved little higher earlier today, the pair gave up the gains and reversed, which suggests that today’s increase could be a verification of the breakdown under the Jul lows. If this is the case, and the pair extends losses, the first target for currency bears would be around 1.0693, where the 112.8% Fibonacci extension (based on the Jul-Aug rally) is. If this support is broken, we may see a decline to 1.0609, where the 88.6% Fibonacci retracement (marked on the weekly chart) is.

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

Trading position (short-term; our opinion): Short positions (which are profitable) with a stop-loss order at 1.1476 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.

GBP/USD

As you see on the charts, although GBP/USD broke below Oct lows and the 61.8% Fibonacci retracement level, currency bulls managed to stop their opponents and trigger a rebound earlier today. Despite this increase, we should keep in mind that as long as there are no daily closures above the Oct lows and the lower border of the brown declining trend channel all upswing will be nothing more than a verification of earlier breakdown. Therefore, another attempt to move lower and a test of the brown support line based on the previous lows can’t be ruled out.

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.

USD/JPY

On Thursday, we wrote:

(…) the next upside target would be the 70.7% retracement (around 122.57) or even the resistance area created by the 76.4%, 78.6% Fibonacci retracement levels and the long-term green resistance line.

On Friday, we added:

(…) the situation developed in line with the above scenario and USD/JPY climbed to the 70.7% retracement. Taking into account the medium-term picture and the current position of the indicators, we think that our next upside target would be in play later in the day (or at the beginning of the coming week).

Looking at the charts from today’s point of view, we see that currency bulls managed to push USD/JPY to the resistance area created by the 76.4%, 78.6% Fibonacci retracement levels and the long-term green resistance line. Taking this fact into account, and combining it with the current position of the indicators, it seems that reversal is just around the corner. Nevertheless, the bearish scenario will be more likely if we see a daily closure under Fibonacci retracements.

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.

Thank you.

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

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