Earlier today, the U.S. dollar extended losses against the yen, which pushed USD/JPY to a fresh August low and approached the exchange rate to very import support. Will it withstand the selling pressure in the coming days?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: short (a stop-loss order at 1.3272; the initial downside target at 1.2375)
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Looking at the charts, we see that EUR/USD extended gains, which resulted in a breakout above the 127.2% Fibonacci extension. What’s next? Taking into account today’s price action, it seems that currency bulls could push the exchange higher and test the 141.4% Fibonacci extension and the 50% Fibonacci retracement based on the entire May 2014-January 2017 downward move (both resistances are around 1.2143-1.2169) in the coming days.
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
Quoting our Friday’s Forex Trading Alert:
(…) currency bulls pushed USD/JPY higher once again, which resulted in a re-test of the previously-broken medium-term green line based on the mid-April and mid-June lows. Although this is a positive event, we saw similar price action in recent days. Back then, both attempts to move higher failed, which suggests that as long as there is no invalidation of the breakdown under this resistance line all upswings could be nothing more than a verification of the earlier breakdown and a bigger move to the upside is not likely to be seen.
If this is the case, we think that the pair will reverse and move lower once again and (at least) test the recent lows. Nevertheless, if this support is broken, we may see a decline even to the mid-April low of 108.11 in the coming week.
From today’s point of view, we see that the situation developed in line with the above scenario and USD/JPY reversed and declined in recent days. As you see on the chart, the exchange rate broke below the previous lows, which suggests that we’ll see realization of our Friday’s scenario and a test of the mid-April low of 108.11 in the very near future. At this point it is also worth noting that slightly below this support is also the 61.8% Fibonacci retracement based on the November-December 2016 upward move, which could help currency bulls stop further declines in the coming days.
Nevertheless, if these supports do not withstand the selling pressure, we may see a decline even to around 107, where the previously-broken upper border of the brown declining trend channel currently is.
Very short-term outlook: mixed with bearish 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 Friday, we wrote the following:
(…) although the green support zone triggered a rebound (…), currency bulls didn’t manage to hold gained levels, which resulted in a reversal (…), the pair extended losses, which suggests that we’ll see a re-test of the recent lows in the coming week (please note that this scenario is currently reinforced by the sell signal generated by the daily Stochastic Oscillator).
On the daily chart, we see that currency bears pushed USD/CHF lower as we had expected. Thanks to the recent decline the exchange rate not only re-tested the recent lows, but also broke below them, which opened the way to the lower border of the orange declining trend channel. Earlier today, the pair slipped under this support, which suggests that we’ll see a test of the July low or even the long-term blue support line seen on the monthly chart below (currently around 0.9381) in the coming days.
Very short-term outlook: mixed with bearish 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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