While the euro action doesn't bring much excitement to the trading floor, that is not the case with the other currency pairs. GBP/USD keeps making new lows, and many are wondering where the downswing's low is going to be. The USD/JPY is also pushing on a string in making new lows. Let's dive in to the charts and prepare some actionable plans.
In our opinion, the following forex trading positions are justified - summary:
EUR/USD
Yesterday's trading hasn't brought any important changes to the overall situation. EUR/USD is still trading inside the blue consolidation, yesterday's move to the upside notwithstanding.
Earlier today, the bears tried once again to take the pair lower, only to see their efforts fizzle out and the rate trading close to unchanged (1.1220) as we speak.
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.
GBP/USD
As GBP/USD appeared ready to head lower, we wrote these words in our Friday's commentary:
(...) we'll likely see a retest of the lower border of the declining grey trend channel. Even a test of the nearby green support zone (seen more clearly on the weekly chart) isn't out of the question.
The daily indicators still support a further downside move.
GBP/USD has indeed slipped to both our downside targets. But what's next?
Yesterday we have seen the invalidation of the tiny breakdown below the lower border of the grey declining trend channel and the green support zone. Additionally, there's a bullish divergence between the CCI and the exchange rate, and the CCI has generated its buy signal. Taking all these into account, an upside reversal may be just around the corner.
The bulls' chances would increase only if we see a successful breakout above last week's peaks. Should we see such price action, we'll consider opening long positions.
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/JPY
USD/JPY has broken below both the lower border of the blue consolidation and the lower border of the declining grey trend channel yesterday.
As the pair rebounded earlier today only to give up all its gains, such price action could be nothing more than a verification of yesterday's breakdown below both the above-mentioned supports.
Such price action suggests that we'll see a test of the green support zone created by the 2018 and early 2019 lows (this can be seen more clearly on the weekly chart below).
Finishing today's USD/JPY commentary, please note that while we a few days ago wrote that if the pair drops below these supports, we'll consider opening short positions, we have to look at other factors, too. It's the proximity to the above-mentioned green support zone - it energized the bulls at the beginning of the year (back then, we saw a very strong rebound and a monthly candlestick with extremely long bottom shadow).
Therefore, waiting on the sidelines is justified from the risk/reward perspective at the moment - especially when we factor in the bullish divergence between USD/JPY and the CCI and the extremely oversold readings of the Stochastic Oscillator. A reversal may be just around the corner.
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.
Summing up the Alert, the euro experienced another downside move rejection earlier today, and the pair is still trading inside its recent consolidation - no new positions are justified. GBP/USD is potentially close to an upside reversal, and we'll monitor the bulls' strength in breaking above last week's peaks - that may lead us to open long positions. Apart from these, there're no other opportunities worth acting upon in the currencies. As always, we'll keep you - our subscribers - informed.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
