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

• EUR/USD: long (a stop-loss order at 1.1057; the initial upside target at 1.1157)
• GBP/USD: long (a stop-loss order at 1.2720; the initial upside target at 1.2976)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Our yesterday's commentary on this currency pair mentions the bears' problems with breaking below the orange support zone. It also notes the potential implications of this situation.

What happened after our Forex Trading Alert was posted? Let's focus on the chart below to find out.

We see that EUR/USD closed Tuesday above the green horizontal line based on the mid-September peak. Earlier today, the bears attempted another downswing, but the bulls successfully stepped in, pushing the exchange rate above yesterday's high. This has made our open long positions profitable.

Taking all the above into account, we continue to think that higher values of EUR/USD could be just around the corner - especially if the exchange rate closes today's session above the peak of Friday's candlestick. This candlestick we be considered as the upper border of the very short-term consolidation.

What could happen if the bulls show more strength?

Let's quote from our yesterday's Alert:

(...) In our opinion, EUR/USD will likely test the upper border of the declining purple trend channel or even the recent peaks.

Trading position (short-term; our opinion): Long positions with a stop-loss order at 1.1057 and the initial upside target at 1.1157 are justified from the risk/reward perspective.

USD/JPY

The first thing that catches the eye, is Monday's breakout above the upper border of the blue consolidation. While this was a bullish sign, the pair didn't rally the next day, suggesting the importance of the orange resistance zone.

What do we mean by that? Let's recall our earlier commentaries:

(...) USD/JPY moved to the orange resistance area, which was strong enough to stop the bulls several times in the past (especially in June and July). As you see, the resistance zone is also supported by the 61.8% Fibonacci retracement, which is slightly above it.

Therefore it is our opinion that as long as they remain on the cards, the way to higher levels is blocked and reversal in the very near future should not surprise us - especially when we factor in the current position of the daily indicators: they both rose to their overbought areas and the Stochastic Oscillator even generated a sell signal.

On top of that, the pair started consolidation, which suggests that the bulls could have lost their strength and their rivals may take over in the very near future.

When would be the right time to consider opening new positions?

Taking into account the buyers' issues with reaching higher values, we think that the decision to go short is just around the corner. Nevertheless, we will stay on the sidelines and wait for stronger clues, such like another daily close below the upper border of the consolidation.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. However, decision to go short is just around the corner.

USD/CAD

Let's remember our Monday's commentary:

(...) The situation developed in tune with the above, and USD/CAD almost touched the green support zone earlier today. Additionally, the CCI and the Stochastic Oscillator are very close to flashing their buy signals.

Combining this fact with the current position of the daily indicators, a reversal and higher values of this currency pair are probably just around the corner.

The daily chart shows that the green support area indeed encouraged the buyers to act. As a result, the exchange rate moved quite sharply higher during yesterday's session and closed the day inside the red declining trend channel, invalidating the earlier breakdown below the formation.

Earlier today, the pair pulled back a bit, but taking into account the buy signals generated by the daily indicators and the proximity to the green zone, we think that further improvement is just around the corner - especially if the bulls prove strong enough to close the day above the green horizontal line.

Should we see such price action, we'll consider opening long positions. As always, we will keep you informed.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. Nevertheless, if we see reliable signs of the bulls' strength, we'll consider opening long positions.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist