Recent days pushed the British pound higher against the U.S. dollar, which resulted in a climb to the zone, where the combination of several resistances defends the road to the north. Who will win the battle for this area and trigger another bigger move?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the daily chart, we see that the situation in the very short term is a bit complicated. On one hand, the buy signal generated by the Stochastic Oscillator is still active, supporting currency bulls and higher values of the exchange rate.
On the other hand, the probability of the head and shoulders formation remains in the cards – especially when we factor in the fact that EUR/USD reversed and decline after a climb to the black declining resistance line based on the previous highs.
Such price action suggests that despite the support from the site of the Stochastic, the pair could move lower and test the blue support line (the neck line of the above-mentioned pattern) in the coming day(s).
If we see a breakdown under this line, we’ll consider opening short positions.
Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective now. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
Quoting our Thursday’s alert:
(…) GBP/USD is consolidating inside the black rising wedge. Additionally, the buy signals generated by the indicators remain in the cards, suggesting that further improvement and a test of the resistance area (marked with the green ellipse) created by the upper border of the purple declining trend channel (marked with dashed lines), the upper line of the black rising wedge and the barrier of 1.4000 is still likely.
From today’s point of view, we see that the situation developed in line with the above scenario and GBP/USD climbed to our upside target yesterday. Earlier today, the pair re-tested this resistance area, but there was no breakout above it, which together with the current position of the indicators suggests that reversal may be just around the corner.
Taking these facts into account, we’ll consider opening short position if we see any reliable bulls’ show of weakness in the coming day(s).
Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective now. 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 the proximity to the resistance area created by the September low (the red horizontal resistance line) and the purple declining resistance line based on the previous peaks was enough to encourage currency bears to act.
As a result, the pair reversed and declined yesterday, which together with the current position of the indicators (the Stochastic Oscillator generated the sell signal), suggests that we’ll likely see further deterioration in the coming days.
Nevertheless, this scenario will be more reliable if the exchange rate closes today’s (or one of the following) session under 106.24 (the Friday’s low). If we see such price action, the initial downside target will be around 105.92, where the 61.8% retracement (based on the recent rebound) is.
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
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
