Although currency bulls failed to keep USD/JPY above the upper border of the very short-term declining trend channel for a third time in a row, the major buyers' ally continues to keep declines in check. What does it mean for the exchange rate?

• EUR/USD: short (a stop-loss order at 1.1466; an initial downside target at 1.1196)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the daily chart, we see that although EUR/USD invalidated the earlier small breakdown under the lower border of the red declining trend channel, the previously-broken 50% Fibonacci retracement stopped the buyers, triggering a pullback earlier today.

Such price action looks like a verification of the breakdown and suggests that one more downswing is still ahead of us. If this is the case and the exchange rate declines from current levels, we’ll see not only a to the lower line of the above-mentioned red channel, but also test of the recent lows in the following days.

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1466 and an initial downside target at 1.1196 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

From the daily perspective, we see that the overall situation in GBP/USD hasn’t changed much as the exchange rate is still trading in a narrow range between the lower border of the very short-term red declining trend channel and two horizontal resistance lines based on August 2017 lows.

Taking all the above into account, we think that our last commentary on this currency pair is up-to-date also today:

(…) the lower border of the very short-term red declining trend channel withstood the selling pressure and continues to keep declines in check.

Therefore, in our opinion, as long as this support remains in the cards a bigger move to the downside is not likely to be seen.

(…) the pair increased slightly, but the size of this move is too small (…) to confirm currency bulls’ strength – especially when we factor in the fact that GBP/USD is still trading under the previously-broken August 2017 lows (marked with both green horizontal lines).

This suggests that a bigger move to the upside will be more likely and reliable only if the exchange rate invalidates the earlier breakdown bellow both green lines and daily indicators generate buy signals. (…)

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

Although USD/JPY increased above the upper border of the very short-term red declining trend channel once again on Friday, currency bulls didn’t manage to hold gained levels, which resulted in another drop below this line.

In this way, the exchange rate invalidated the earlier tiny breakout for a third time in a row, which doesn’t bode well for higher values of USD/JPY in the very near future – especially when we factor in the sell signal generated by the Stochastic Oscillator.

Nevertheless, as long as the buyers’ strong and solid ally (the long-term orange support line seen more clearly on the weekly chart below) continues to keep declines in check a sizable move to the downside is not likely to be seen.

Finishing today’s commentary on this currency pair, please note that USD/JPY closed the previous week above this very important support line, which looks like another verification of the earlier breakout. Therefore, as long as there is no weekly closure under this line one more reversal from here should not surprise us.

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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