Although U.S. dollar moved higher against the yen earlier today, USD/JPY is still trading in a consolidation under important resistance line. Will we see a breakout in the coming days?

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

• EUR/USD: long (a stop-loss order at 1.1114; initial upside target at 1.1327)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: short (a stop-loss order at 1.3346; initial downside target at 1.2876)
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the daily chart, we see that EUR/USD is currently trading in the blue consolidation, which makes the very short-term picture a bit unclear. Nevertheless, a buy signal generated by the Stochastic Oscillator continues to support currency bulls, suggesting a re-test of the orange resistance zone in the coming day(s).

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

Trading position (short-term; our opinion): Long positions (with a stop-loss order at 1.1114 and initial upside target at 1.1327) 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

On the above charts, we see that USD/JPY is consolidating above the green support line based on the Jun and Aug lows (marked on the weekly chart) and under the orange declining resistance line (seen on the daily chart). This means that as long as we won’t see a breakout above the upper line of the formation (and the orange line) or a breakdown below the lower border 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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

From the long-term perspective, we see that USD/CAD came back to the blue consolidation and invalidated earlier breakout above the upper border of the formation, which is a negative signal that suggests further deterioration – especially when we factor in the fact that the exchange rate closed the previous month under 1.3214 (the Apr peak).

How low could the pair go in the comin days? We think that the best answer to this question will be the quote from our Friday’s alert:

(…) currency bulls pushed USD/CAD higher, but they didn’t manage to hold gained levels, which resulted in a pullback. In this way, the pair verified earlier breakdown under the yellow resistance zone, which in combination with sell signals generated by the indicators increases the probability of further declines. If this is the case and the pair moves lower from current levels, the first downside target would be around 1.3000-1.3028, where the last week’s lows are.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3346 and initial downside target at 1.2876) 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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