Earlier today, the greenback extended losses against the yen, which pushed USD/JPY to the key support area. What’s next?

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

• EUR/USD: none
• GBP/USD: short (a stop-loss order at 1.2576; the initial downside target at 1.2157)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (a stop-loss order at 0.7873; the initial downside target at 0.7498)

EUR/USD

From today’s point of view, we see that the overall situation hasn’t changed much since yesterday, which means that our Tuesday’s commentary on this currency pair is up-to-date also today:

(…) the exchange rate approached the February high and reached the yellow resistance zone. Additionally, there are negative divergences between the CCI and the Stochastic Oscillator and the exchange rate, which suggests that reversal may be just around the corner.

(…) slightly above the current levels there are two important Fibonacci retracements: the 50% retracement based on the November-January downward move and the 38.2% retracement based on the entire May – January decline, which increases the probability of reversal in very near future – especially when we factor in the long-term picture of the exchange rate.

On the monthly chart, we see that the exchange rate reached the previously-broken long-term green line, which looks like another verification of the earlier breakdown. If this is the case, EUR/USD will reverse and decline from current levels in the coming week.

Very short-term outlook: mixed
Short-term outlook: mixed with bearish bias
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.

USD/JPY

Looking at the long- and medium-term picture, we see that USD/JPY reached the key support area created by the lower border of the brown declining trend channel and the green support zone, which suggests that we may see (at least) a very short-term rebound from here in the coming days. Nevertheless, if the air drops below this important area, we may see a decline even to around 108.86, where the 50% Fibonacci retracement (based on the entire June-December rally).

Very short-term outlook: mixed
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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