Yesterday, the U.S. dollar extended gains against the yen, which pushed USD/JPY above important resistance line. Will the invalidation of the earlier breakdown trigger firther improvement?

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

• EUR/USD: short (a stop-loss order at 1.2250; the initial downside target at 1.1466)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the charts, we see that the overall situation hasn’t changed much as EUR/USD is still trading around yesterday’s levels. Therefore, we believe that our previous commentary on this currency pair is up-to-date:

(…) on the long-term chart, we see that EUR/USD is still trading in the orange resistance zone. Additionally, indicators increased to the highest levels since April 2014. Back then, such high readings of the CCI and Stochastic Oscillator preceded bigger move to the downside, which suggests that we may see a similar price action in the coming week(s).

(…) on the medium-term chart (….), we can see that the CCI and Stochastic Oscillator already generated the sell signals, supporting currency bears. (…) we also see that the exchange rate is quite close to invalidating the earlier breakout above the 127.2% Fibonacci extension. On top of that, (…), EUR/USD slipped below the upper border of the brown rising trend channel, invalidating the earlier breakout.

Earlier today, the pair rebounded slightly, but taking into account all the above-mentioned factors and the sell signals generated by the daily indicators, we think that it’s nothing more than a verification of yesterday’s breakdown. If this is the case, we’ll see reversal and further deterioration in the very near future. How low could the exchange rate go? In our opinion, the first downside target will be the lower border of the brown rising trend channel (currently around 1.1792).

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 1.2250 and the initial downside target at 1.1466) 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 Monday, we wrote the following:

(…) USD/JPY invalidated the breakdown under the mid-April low, which together with the buy signals generated by the weekly and daily indicators suggests further improvement in the coming days.

How high could the exchange rate go in the coming week? In our opinion, the initial upside target will be around 109.80, where the previously-broken long-term green line based on the April and June lows currently is.

From today’s point of view, we see that the situation developed in line with the above scenario and USD/JPY increased above our first upside target yesterday. Thanks to ths increase, the pair invalidated the earlier breakdown below the long-term green line based on the April and June lows, which suggests further improvement in the coming days – especially if currency bulls push USD/JPY above the red declining resistance line based on the previous highs. If we see such price action, the next upside target will be the yellow resistance zone seen on the daily chart.

Very short-term outlook: mixed with bullsh 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.

AUD/USD

On the daily chart, we see that currency bears pushed AUD/USD a bit lower at the beginning of the week. Although the pair increased slightly earlier today, the sell signals generated by the daily indicators remain in place, supporting another attempt to move lower. If we see such price action, the pair will test the lower border of the purple rising trend channel in the very near future. If this support is broken, the way to lower levels will be likely open. As always, we’ll keep you - our subscribers - informed should anything change.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
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.

Thank you.

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

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