Yesterday, the USD Index moved sharply lower and hit a fresh 2017 low. Earlier today, we saw further deterioration and a drop below the level of 96. What impact did this decline have on the euro, the British pound and the yen?

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

• EUR/USD: short (a stop-loss order at 1.1505; the initial downside target at 1.1009)
• GBP/USD: short (a stop-loss order at 1.3232; the initial downside target at 1.2375)
• USD/JPY: long (a stop-loss order at 107.62; the initial upside target at 113.08)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (a stop-loss order at 0.7683; the initial downside target at 0.7444)

EUR/USD

On the medium-term chart, we see that EUR/USD extended gains and climbed slightly above the yellow resistance zone. Despite this move, the long-term red declining resistance line (the key resistance at the moment) continues to keep gains in check. Additionally, the current position of the weekly and daily indicators suggests that reversal is just around the corner.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.1505 and the initial downside target at 1.1009) 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

Looking at the daily chart, we see that although GBP/USD moved sharply higher yesterday, currency bulls didn’t manage to push the pair higher, which resulted in a pullback and a comeback to the blue consolidation. Additionally, the CCI and the Stochastic Oscillator increased to their overbought areas, suggesting that sell signals and lower values of GBP/USD are still ahead us. If this is the case and GBP/USD declines from current levels, we’ll see a test of the recent lows in the coming week.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3232 and the initial downside target at 1.2375) 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 weekly chart, we see that USD/JPY extended gains above the previously-broken upper border of the brown declining trend channel, which together with the buy signals generated by the indicator suggests further improvement in the coming week.

How did this move affect the very short-term picture? Let’s check.

Looking at the daily chart, we see that USD/JPY broke above the upper border of the blue consolidation and increased above the 61.8% Fibonacci retracement and the orange resistance zone yesterday. Thanks to this move, the pair approached the upper line of the green rising trend channel, which triggered a pullback earlier today. Nevertheless, the Stochastic Oscillator re-generated the buy signal, which together with the medium-term picture suggests that we’ll likely see a test of the upper border of the green channel in the coming day(s).

Very short-term outlook: bullish
Short-term outlook: mixed with bullish bias
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 113.08) 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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