At the end of the previous week the U.S. dollar moved higher against the yen, which resulted in a breakout above the upper border of the short-term declining trend channel. Will we see further improvement in the following days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the daily chart we see that although EUR/USD increased above the upper border of the pink consolidation currency bulls didn’t manage to push the pair higher, which resulted in a decline and another invalidation of the earlier breakout above this line. With this move the exchange rate also slipped below the lower border of the blue rising trend channel, which suggests further deterioration in the near future. Nevertheless, in our opinion, such price action will be more likely and reliable if EUR/USD closes today’s or one of the following days under this blue line and the long-term red support line based on the March and November lows (marked on the weekly chart). If we see such bearish development, we’ll consider opening short positions.
Very short-term outlook: mixed with bearish 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. However, if we see a daily closure under the lower border of the blue trend channel and the long-term red support line based on the March and November lows (marked on the weekly chart) we’ll consider opening short positions. 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 USD/JPY broke above the upper border of the pink consolidation and the upper border of the blue declining trend channel at the end of the previous week. With this increase the pair reached the orange resistance zone created by the recent highs, which triggered a pullback earlier today. As a result, USD/JPY slipped to the previously-broken upper border of the pink consolidation, which looks like a verification of the earlier breakout. If this is the case, currency bulls will try to push the pair higher. How high could the exchange rate go? In our opinion, the initial upside target will be around 116.32, where the size of the upward move will correspond to the height of the consolidation. If this level is broken, USD/JPY could move even to around 117.60, where the size of an increase will correspond to the height of the declining trend channel. Nevertheless, such price action will be likely only if USD/JPY closes today’s session (or one of the following) above the orange resistance area.
Very short-term outlook: mixed
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
Looking at the daily chart we see that USD/CHF is still consolidating between the previously-broken lower border of the pink consolidation and the green support zone, which makes the situation unclear – especially when we factor in the fact that the exchange rate remains in the purple declining trend channel. Therefore, our last commentary on this currency pair is still valid:
(…) When can we expect another bigger move? In our opinion, USD/CHF extends gains only if we see a breakout above the orange resistance zone and the upper border of the trend channel. However, another downswing and a re-test of the green support zone before a move to the upside can’t be ruled out.
Very short-term outlook: mixed
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. 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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