Earlier today, official data showed that Japanese second quarter GDP (a year-on-year and also a quarter-on-quarter basis) rose less-than-expected, missing analysts’ forecasts. In this environment, the yen moved little lower against the greenback, but did this move change anything in the short-term picture of the exchange rate?

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

• EUR/USD: none
• GBP/USD: short (a stop-loss at 1.3579; initial downside target at 1.2519)
• USD/JPY: none
• USD/CAD: short (stop-loss at 1.3274; initial downside target at 1. 2740)
• USD/CHF: short (stop-loss at 0.9895; initial downside target at 0.9651)
• AUD/USD: none

EUR/USD

Looking at the daily chart, we see that the proximity to the upper border of the medium-term red declining trend channel encouraged currency bears to act on Friday. As a result, the pair invalidated earlier breakout above Wednesday’s high, which in combination with sell signals generated by the CCI and Stochastic Oscillator suggests further deterioration in the coming week. If this is the case, and the exchange rate drops under the Friday’s low, the initial downside target would be around 1.1093, where the upper purple declining support line currently is.

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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

GBP/USD

On the daily chart, we see that GBP/USD extended losses under the previously-broken lower border of the blue consolidation, which means that what we wrote on Friday remains valid:

(…) Wednesday’s move could be just a verification of the breakdown below the lower border of the blue consolidation. This scenario is also reinforced by today’s drop, which means that (…) negative image that emerges from the long- and medium-term perspective will trigger another move to the downside in near future. If this is the case, and GBP/USD declines from current levels, we’ll see (at least) a test of the Jul lows.

(…) GBP/USD extended losses (although it is still trading in the blue consolidation) under the lower border of the red declining trend channel and the neck line of the head and shoulders formation, which is a negative signal that suggests further deterioration.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish

Trading position (short-term; our opinion): Short positions (with a stop-loss at 1.3579 and the initial downside target at 1.2519) 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 the daily chart, we see that although currency bears pushed USD/JPY lower on Friday, the exchange rate is still trading in the blue consolidation. This means that as long as there won’t be a breakout above the last week’s high or a breakdown under the green zone, another bigger move is not likely to be seen.

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 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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