Earlier today, the U.S. dollar moved higher against the yen once again as yesterday’s Japan’s Finance Minister’s commentary (Taro Aso said that his country could intervene in the currency market if necessary) continued to weigh on investors’ sentiment. In this environment, USD/JPY approached the first resistance area. Will currency bulls manage to push the exchange rate above it in the coming days?

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

• EUR/USD: short (stop-loss order at 1.1754; initial downside target at 1.1222)
• GBP/USD: short (stop-loss order at 1.4819; initial downside target at 1.4303)
• USD/JPY: none
• USD/CAD: long (stop-loss order at 1.2182; initial upside target at 1.3000)
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the charts, we see that the green horizontal support line based on the Feb high triggered a small rebound earlier today. Despite this move, EUR/USD is still trading under the key resistance area and there are no buy signals, which suggest that another attempt to move lower is likely. If this is the case and the exchange rate drops under the Feb high, the next downside target would be around 1.1264, where the upper border of the purple declining trend channel is.

Very short-term outlook: bearish
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 1.1754 and the initial downside target at 1.1222) 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 above charts, we see that invalidation of earlier breakdowns under the 38.2% Fibonacci retracement (marked on the monthly chart) and the green zone seen on the weekly chart triggered further improvement. Additionally, the current position of weekly and monthly indicators suggests that higher values of the exchange rate are just around the corner. But are there any factors that could hinder the realization of the above scenario? Let’s examine the daily chart and find out.

From this perspective, we see that USD/JPY exended gains, but slightly above current levels is the lower border of the previously-broken red declining trend channel and the 23.6% Fibonacci retracement based on the entire Jun 2015-May 2016 downward move, which together could encourage currency bears to act – especially when we factor in the fact tha the Stochastic Oscillator is overbought and very close to generating a sell signal.

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

USD/CHF

Looking at the weekly chart, we see that the green support/resistance line stopped further declines, triggering a small rebound. Although this is a positive sign, we should keep in mind that USD/CHF remains under the 38.2% Fibonacci retracement (the first resistance before the Apr high), while the current position of the indicators suggests that the pair could reverse and verified upswing above the brown line (currently around 0.9614) in the coming days. Therefore, in our opinion, waiting on the sidelines for the next profitable opportunity is justified from the risk/reward perspective at the moment.

Very short-term outlook: mixed
Short-term outlook: mixed with bullish 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.

As a reminder – “initial target price” means exactly that – an “initial” one, it’s not a price level at which we suggest closing positions. If this becomes the case, we will refer to these levels as levels of exit orders. Stop-loss levels, however, are naturally not “initial”, but something that, in our opinion, might be entered as an order.

Thank you.

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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts