In recent days the U.S. dollar declined sharply against the yen, which resulted in a drop to the lower border of the rising trend channel, but will we see further deterioration in the coming week?

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

• EUR/USD: short (a stop-loss order at 1.1563; the initial downside target at 1.1009)
• GBP/USD: short (a stop-loss order at 1.3232; the initial downside target at 1.2375)
• USD/JPY: long (a stop-loss order at 111.67; the initial upside target at 114.87)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

From today’s point of view, we see that the overall situation hasn’t changed much, which means that what we wrote yesterday is up-to-date:

(…) EUR/USD remains under both key resistance lines: the long-term red resistance line based on the August 2015 and May 2016 peaks and the red horizontal resistance line cased on the highest weekly closures. There are also negative divergences between the CCI, the Stochastic Oscillator and the exchange rate, which together with the sell signals generated by the daily indicators increases the probability of reversal in the coming days.

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

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1563 and the initial downside target at 1.1009) 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

Looking at the daily chart, we see that the 23.6% Fibonacci retracement triggered a rebound, which together with the buy signal generated by the Stochastic Oscillator suggests a test of the yellow resistance zone and the red declining resistance line in the coming days. Nevertheless, as long as there is no breakout above this area another downswing is more likely than not.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3232 and the initial downside target at 1.2375) 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 invalidation of the breakout above the upper border of the green rising trend channel encouraged currency bears to act and resulted in a sharp decline to the lower border of the formation. With this drop the exchange rate also slipped to the red declining line based on the previous peaks, which serves as the nearest support. What’s next? Taking into account the proximity to these lines, we think that reversal and rebound is very likely. If this is the case and we see such price acton, the first upside target for currency bulls will be around Tuesday’s high.

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

Trading position (short-term; our opinion): Long positions (a stop-loss order at 111.67 and the initial upside target at 114.87)) 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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