Looking at the chart of USD/JPY, we can say that the recent days were very painful for currency bulls. They not only lost ground after the breakdown under the last week’s low, but also lost the battle for the September 2017 low. Is there any chance to improve their position in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.2806; the initial downside target at 1.2186)
• GBP/USD: short (a stop-loss order at 1.4548; the next downside target at 1.3685)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (a stop-loss order at 0.8222; the initial downside target at 0.7743)

EUR/USD

Looking at the daily chart, we see that currency bulls pushed EUR/USD to a fresh 2018 high, but as it turned out quite quickly they lost their strength and gave up gained levels. This show of weakness encouraged their opponents to act. As you see, currency bears took control and invalidated the earlier tiny breakout above the previous highs, which triggered further deterioration.

Taking this negative development (at least at the moment of writing these words) into account and combining it with the current position of the daily indicators (they are very very close to generating the sell signals), we think that another move to the downside is just ahead of us.

In this case, the first downside target will be around 1.2238, where the orange support line (based on the November and early January highs). Nevertheless, this pro-bearish scenario will be even more reliable if the exchange rate closes today’s session under the January and February peaks.

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.2806 and the initial downside target at 1.2186) 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

From today’s point of view, we see that an invalidation of the earlier breakdown under the upper border of the black rising trend channel encouraged currency bulls to act in recent days. As a result, the exchange rate extended gains and came back to the blue consolidation earlier today.

Despite this positive event, the upper border of the purple declining trend channel (marked with the dashed lines) stopped the buyers, triggering a reversal and decline. Thanks to this drop, GBP/USD came back below the lower line of the blue consolidation, which increases the probability that we’ll see a re-test of the upper black support line and the recent lows at the beginning of the next week.

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.4548 and the next downside target at 1.3685) 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

On the daily chart, we see that currency bears were merciless for USD/JPY and took the exchange rate to a fresh 2018 lows in recent days. With this decline the pair slipped to the area, where the size of the downward move corresponded to the height of the blue declining trend channel, which suggests that sellers' pressure can be reduced. This scenario is also reinforced by the proximity to the 127.1% Fibonacci extension (marked with blue) and the current position of all daily indicators.

As you see they are extremely oversold and very close to generating buy signals, which increases the probability of reversal and a bigger rebound in the coming day(s). If we see such price action, the first upside target will be the previously-broken September 2017 low of 107.30.

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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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