Yesterday, USD/JPY bounced off the nearest support zone, which resulted in a comeback to the previously-broken lower border of the consolidation. Is this just a verification of the earlier breakdown or something more?
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
From today’s point of view, we see that EUR/USD extended losses earlier today, which means that what we wrote on Friday remains up-to-date also today:
(…) EUR/USD reversed and declined after an increase to the neck line of the head and shoulders formation and the lower border of the orange resistance zone seen on the monthly chart. Taking this fact, the current position of the daily indicators (…) and the sell signals generated by the long-term CCI and the Stochastic Oscillator, we think that the recent upward move was nothing more than a verification of the earlier breakdown below the above-mentioned resistance. If this is the case, EUR/USD will decline from current levels and re-test the green horizontal support line based on the mid-August low in the coming days.
Very short-term outlook: bearish
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 although USD/JPY broke below the lower border of the blue consolidation, the yellow support zone based on the bottom of the earlier bigger pullback stopped currency bears, triggering a rebound. As a result, the exchange rate came back to the previously-broken lower line of the formation, which could be a verification of the earlier breakdown.
Nevertheless, taking into account the fact that the CCI and the Stochastic Oscillator generated buy signals, we think that further improvement is just around the corner – especially if USD/JPY moves higher from current levels and comes back to the consolidation, invalidating the earlier breakdown.
If we see such price action, the next target for currency bulls will be the upper border of the consolidation and the October peak (around 113.23-113.41).
Very short-term outlook: mixed with bullish bias
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/CHF
On the daily chart, we see that USD/CHF extended gains earlier today, which means that what we wrote on Friday is valid also today:
(…) taking into account the current position of the daily Stochastic Oscillator, it seems that we may see further improvement and a test of the previously-broken the lower border of the blue rising wedge (or even the upper border of the orange declining trend channel) in the coming week.
Finishing today’s commentary on this currency pair, it seems to us that a re-test of the October peak in the coming days should not surprise us.
Very short-term outlook: mixed with bullish bias
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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