Earlier this week, the U.S. dollar increased against the yen, which pushed USD/JPY above important resistances. Is it enough to break above July highs?

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

• EUR/USD: short (a stop-loss order at 1.2250; the initial downside target at 1.1510)
• GBP/USD: short (a stop-loss order at 1.3773; the initial downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Earlier today, EUR/USD wavered between small gains and losses around yesterday levels, which means that what we wrote on Monday on this currency pair remains up-to-date also today:

(…) the Stochastic Oscillator re-generated the sell signal, which encouraged currency bears to act (…) As a result, EUR/USD extended Friday losses, suggesting that (…) currency bears will re-test the green horizontal support line based on the mid-August low in the coming week.

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

Trading position (short-term; our opinion): Short profitable positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1510) 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 USD/JPY remains above the previously-broken upper border of the purple rising trend channel and the long-term red declining resistance line, which means that our last commentary on this exchange rate is still valid:

(…) What’s next? Taking into account the breakout above the purple resistance line and the fact that there are no sell signals generated by the indicators, we think that the pair will test not only the yellow resistance zone, but will also climb to the orange resistance area (in this zone, the size of the upward move will correspond to the height of the purple trend channel) in the coming week.

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.

USD/CAD

Quoting our Monday alert:

(…) USD/CAD bounced off the red declining line based on the May and June highs and the 23.6% Fibonacci retracement, which triggered an increase to the highest level since late August. Taking this fact into account and combining it with the lack of the sell signals generated by the indicators, we think that the exchange rate will test the yellow resistance zone and the 38.2% Fibonacci retracement in the coming week.

From today’s point of view, we see that the situation developed in line with the above scenario and USD/CAD increased to our upside targets. What’s next for the exchange rate? Taking into account the resistance area, we think that the pair will reverse and decline in the following days. In this case, the initial downside target will be around 1.2431-1.2448, where the recent lows are. Nevertheless, as long as there are no sell signals generated by the indicators, one more upswing and a test of the mid-August highs can’t be ruled out.

Very short-term outlook: mixed
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 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, Gold & Silver Fund Manager

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