Recent sessions took EUR/USD closer to the support line, which managed to stop currency bears at the beginning of the month. Will the history repeat itself again and we see another move to the north 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

Quoting our yesterday’s alert:

(….) this support line was strong enough to stop declines two weeks ago and trigger an upward move in the following days. This suggests that a rebound from here can’t be ruled out. Nevertheless, this time the indicators have some more space, which could result in a breakdown. If we see such price action, and EUR/USD closes today’s or one of the following sessions under the orange line, currency bears will likely check their opponents’ strength not only around the recent lows, but also around the 38.2% Fibonacci retracement.

Looking at the daily chart, we see that although EUR/USD bounced off the orange support line yesterday, currency bears didn’t give up and pushed the pair lower earlier today. This suggests that further deterioration and the realization of Thursday’s pro-bearish scenario is likely – especially when we factor in the broader perspective form our last commentary on this currency pair:

(…) From the broader perspective, we see that the overall situation hasn’t changed much as EUR/USD remains in the blue consolidation under the previously-broken 38.2% Fibonacci retracement. This means that an invalidation of the earlier breakouts (above the retracement and the upper line of the blue consolidation) and its negative impact on the value of EUR/USD are still in effect, supporting currency bears.

Additionally, the sell signals generated by the medium-term indicators remain in the cards, suggesting that a bigger move to the downside is just a matter of time.

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.

USD/JPY

Although currency bulls pushed USD/JPY above the September low and invalidated the earlier breakdown, they didn’t manage to hold gained levels on the following day. This show of weakness triggered a sharp decline and a comeback under the red horizontal line (based on the above-mentioned September low), which doesn’t bode well for the buyers – especially when we factor in the sell signal generated by the Stochastic Oscillator.

So what can we expect at the beginning of the coming week? Connecting the dots, we think that the pair will move lower and test the strength of the recent low or even the 127.2% Fibonacci extension in the very near future.

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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