Yesterday, the U.S. dollar slipped to the lowest level in 2017 against the yen, which resulted in a test of two important support lines. Will they withstand the selling pressure in the coming days?

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

• EUR/USD: short (a stop-loss order at 1.0967; the initial downside target at 1.0521)
• GBP/USD: short (a stop-loss order at 1.2738; the downside target at 1.2157)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

On the above charts, we see that not much happened earlier today as EUR/USD is still trading in the blue consolidation under the previously-broken long-term red resistance line based on the March and November 2015 lows, which makes the very short-term picture a bit unclear.

Nevertheless, what we wrote about the medium-term perspective on Thursday remains up-to-date:

(…) EUR/USD moved higher and climbed to the previously-broken long-term red resistance line based on the March and November 2015 lows and then reversed. Such price action looks like another verification of the earlier breakdown and suggests further deterioration in the coming week(s) – especially when we factor in the sell signals generated by the weekly indicators.

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.0967 and the initial downside target at 1.0521) 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

The situation in the medium term hasn’t changed much as GBP/USD remains in the blue consolidation. Nevertheless, the current position of the indictors suggests that reversal and lower values of the exchange rate are just around the corner.

Will the very short-term chart give us more bearish signs? Let’s check.

From this perspective, we see that although GBP/USD increased in the previous days, the recent highs and the yellow resistance zone continue to keep gains in check. At this point it is also worth noting that even if the pair moves a bit higher, the space for gains seems limited as not far from current levels is also the key orange resistance zone, which successfully stopped currency bulls in December, January and February. Additionally, the CCI climbed to its overbought area, while the Stochastic Oscillator generated the sell signal, which increases the probability of reversal and declines in the coming days. If this is the case, we’ll see (a least) a drop to around 1.2364-1.2369, where the April lows are.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.2738 and the downside target at 1.2157) 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

A week ago, we wrote the following:

(…) if USD/JPY breaks below the recent lows, we may see a decline even to around 108.86, where the 50% Fibonacci retracement based on the entire June-November upward move is. At this point, it is also worth noting that in this area the size of the current decline will correspond to the downward move, which we saw between January and early February.

From today’s point of view, we see that the situation developed in tune with the above scenario and USD/JPY declined to our downside target yesterday. Thanks to this drop, the pair reached not only the lower border of the brown declining trend channel, but also the lower line of the blue trend channel, which increases the probability of reversal in the very near future – especially when we take into account the current position of the daily indicators (seen on the daily chart below), which generated the buy signals.

Nevertheless, as long as USD/JPY is trading in the brown declining trend channel, another attempt to move lower and a test of the strength of yesterday’s levels can’t be ruled out.

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.

Thank you.

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

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