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

• EUR/USD: long (a stop-loss order at 1.0954; the initial upside target at 1.1165)
• GBP/USD: none (in other words, we decided to close our long positions and take profits off the table)
• USD/JPY: short (a stop-loss order at 110.03; the initial downside target at 107.14)
• USD/CAD: none
• USD/CHF: short (a stop-loss order at 1.0035; the initial downside target at 0.9849)
• AUD/USD: none

EUR/USD

EUR/USD has been flirting with the green support zone recently, yet strongly rebounded yesterday. Was it a surprise? Not if you're reading our analysis. Enough tooting our horn, what's next in store for the pair?

These were our yesterday's observations:

(...) While EUR/USD slightly decline on Friday, the green support zone coupled with the 61.8% Fibonacci retracement stopped the sellers. A rebound followed, and the pair finished the day above the said support. This way, the tiny intraday breakdown below it has been invalidated.

In mid-November, we have seen similar price action, which suggests that reversal followed by higher values of the exchange rate may be just around the corner. This is especially so when we factor in the position of the daily indicators. Both the CCI and the Stochastic Oscillator have generated their buy signals just as they did in mid-November, which increases the likelihood of further improvement this week.

The situation developed in line with expectations, and the exchange rate moved sharply higher during yesterday's session. This upswing brought the pair back above the previously broken lower border of the declining grey trend channel, and the earlier breakdown was invalidated this way.

Additionally, both the CCI and the Stochastic Oscillator generated their buy signals, lending more support to the bulls.

Earlier today, we saw another attempt to move higher. It's our opinion that further rally will be more likely and reliable only if the exchange rate breaks above the late-November peaks.

Should the bulls prove strong enough and overcome that 1.1100 mark, the way to the upper border of the grey trend channel would be open.

Trading position (short-term; our opinion): long positions with a stop-loss order at 1.0954 and the initial upside target at 1.1165 are justified from the risk/reward perspective.

USD/JPY

Although USD/JPY extended gains in recent days, the combination of both borders of the rising green wedge and also the 61.8% Fibonacci retracement stopped the buyers.

A sharp correction followed yesterday, invalidating the earlier small breakout above the orange resistance zone and the green dashed support line that is based on October and November lows. This doesn't bode well for the bulls and higher values of USD/JPY.

Should the pair indeed move lower, just where could the bears aims? Let's quote our Wednesday's commentary:

(...) the first downside target for the bears will be around 107.93-108.04. This is where the nearest support area (created by the lows at the turn of Oct and Nov) is.

Trading position (short-term; our opinion): Short positions with a stop-loss order at 110.03 and the initial downside target at 107.14 are justified from the risk/reward perspective.

USD/CHF

In our Monday's USD/CHF commentary, we wrote the following:

(...) The pair came near the resistance area created by the upper border of the rising green trend channel and the orange resistance zone. Together, they have been strong enough to stop the sellers several times in the past already.

Therefore, as long as there is no breakout above them, another bigger move to the upside is not likely to be seen and a reversal wouldn't surprise us in the least.

The pair indeed reversed lower, and invalidated the earlier tiny breakout above both resistances. A sharp move to the downside followed yesterday, and we saw its continuation earlier today too.

Combined with the sell signals generated by the daily indicators, this increases the probability of not only seeing a test of the lower border of the rising green trend channel, but also of a re-test of the green support zone that is based on the late-September, October and early-November lows soon.

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.0035 and the initial downside target at 0.9849 are justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist