Yesterday, USD/CAD broke below the lower border of the consolidation and reached the support area. Will it manage to stop currency bears in the coming days?

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

• EUR/USD: none
• GBP/USD: short (a stop-loss order at 1.3087; the initial downside target at 1.2602)
• USD/JPY: long (a stop-loss order at 107.62; the initial upside target at 111.16)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

On the weekly chart, we see that EUR/USD moved sharply higher and broke above two important resistance lines – the upper border of the brown rising trend channel and the long-term red declining resistance line. This is a bullish development, which suggests further improvement and a test of the 61.8% Fibonacci retracement based on the May 2016-January 2017 downward move (around 1.1127). Nevertheless, the current position of the weekly indicators suggests that reversal in the coming week is likely.

Very short-term outlook: bullish
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.

USD/JPY

Looking at the daily chart, we see that although USD/JPY moved lower at the end of the previous week, the overall situation in the short term hasn’t changed much as the exchange rate remains in the blue consolidation. Nevertheless, the medium-term picture suggests another attempt to move higher the coming days.

From this perspective, we see that USD/JPY is still trading above the upper border of the brown declining trend channel, which together with the current position of the weekly indicators suggests further improvement. If this is the case, the next upside target for currency bulls will be the orange resistance zone.

Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Long positions (with a stop-loss order at 107.62 and the initial upside target at 111.16) 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/CAD

Quoting our previous commentary on this currency pair:

(…) USD/CAD approached the 61.8% Fibonacci retracement, which together with the proximity to the upper border of the red rising trend channel marked on the weekly chart below increase the probability of reversal in the coming week.(…)

From today’s point of view, we see that currency bears pushed the exchange rate lower as we had expected. Thanks to yesterday’s drop USD/CAD broke below the lower border of the blue consolidation, which suggests further deterioration. Nevertheless, in our opinion, such price action will be more likely and reliable if the exchange rate declines below the upper line of the blue rising trend channel and invalidated the breakout above the November and December highs. In this case, the initial downside target for currency bears will be around 1.3511, where the size of the downward move will correspond to the height of the blue consolidation.

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): 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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