Yesterday, the U.S. currency increased against the yen, which took USD/JPY above the upper line of the medium-term consolidation. Positive event? Yes. However, there is one important factor that keeps this currency pair below the level of 112. Do you want to check its impact on the exchange rate?
EUR/USD: short (a stop-loss order at 1.1833; the initial downside target at 1.1588)
GBP/USD: none
USD/JPY: none
USD/CAD: none
USD/CHF: none
AUD/USD: short (a stop-loss order at 0.7510; the initial downside target at 0.7315)
EUR/USD
Quoting our last commentary on this currency pair:
(…) the exchange rate extended losses, which together with the current position of the daily indicators (the CCI and the Stochastic Oscillator generated sell signals) suggests that lower values of EUR/USD are just around the corner. Therefore, we believe that closing the other half of our short positions and taking profits off the table (yes, they are still profitable at the moment of writing this alert) is justified from the risk/reward perspective.
From today’s point of view, we see that although EUR/USD rebounded after our alert was posted currency bulls didn’t manage to come back above the previously-broken upper border of the brown rising trend channel. In our opinion, this is a show of the buyers’ weakness, which suggests that another attempt to move lower is very likely – especially when we factor in the fact that the sell signals generated by the CCI and the Stochastic Oscillator remain in the cards, supporting currency bears and lower values of EUR/USD.
Taking all the above into account, we think that opening short positions is justified from the risk/reward perspective.
Trading position (short-term; our opinion):Short positions with a stop-loss order at 1.1833 and the initial downside target at 1.1588 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 weekly chart, we see although USD/JPY moved slightly above the upper border of the blue consolidation earlier this week, the major resistance (the orange declining line based on the August 2015, December 2015 and January 2017 peaks) continues to keep gains in check.
Similar situation we saw in the last quarter of 2017, which means that as long as there is no successful breakout above it a sizable move to the upside is quite doubtful.
Will the very short-term chart currency bulls more hope for higher levels?
Not really, because from this point of view, the currency pair is trading inside the yellow resistance zone based on the previous highs, suggesting that higher values of USD/JPY will be more likely only of we see a confirmed breakout above this resistance are.
Connecting the dots, if we see reliable signs of currency bulls’ strength, we’ll consider opening long positions. Meanwhile, waiting at the sidelines seems to be best investment idea for the moment of writing this alert.
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/CHF
Looking at the daily chart, we see that the overall situation in short term hasn’t changed much as USD/CHF remains in the blue consolidation between the orange resistance zone and the lower border of the brown rising trend channel.
Although the exchange rate slipped under the lower line of the trend channel, currency bulls triggered a rebound very quickly, invalidating the earlier breakdown in the following hours. Such price action suggests that they are active around the 23.6% Fibonacci retracement and late June lows, suggesting that they will not give up in this area too easily.
In other words, another attempt to move higher from current levels should not surprise us. Nevertheless, in our opinion, opening any positions now is not justified from the risk/reward perspective.
Why? Because as long as there is no breakout above the orange resistance zone or a confirmed breakdown below the above-mentioned supports a bigger move is not likely to be seen – especially when we factor in the medium-term picture below, which clearly shows that the pair still remains in a bigger blue consolidation that makes the broader perspective too unclear to risk money.
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.
AUD/USD
On Monday, AUD/USD extended gains and broke above the orange resistance zone. Despite this improvement, currency bulls didn’t manage to reach the initial upside target (the upper line of the blue area, where the size of the upward move corresponds to the height of the blue consolidation), rising doubts about their strength.
Yesterday, the buyers tried to go higher once again, but the proximity to the resistance area created by the Fibonacci retracements (marked with red and red doted lines) was enough to trigger another pullback.
This show of weakness encouraged their opponents to act, which resulted in further deterioration earlier today. Thanks to the sellers’ action AUD/USD slipped below the orange resistance zone, invalidating the earlier breakout.
Additionally, the CCI and the Stochastic Oscillator generated sell signals, increasing the probability of lower values of the exchange rate in the coming days.
Connecting the dots, we think that opening short positions is justified from the risk/reward perspective as the pair could even test the recent lows.
Trading position (short-term; our opinion): Short positions with a stop-loss order at 0.7510 and the initial downside target at 0.7315 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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