Yesterday, the greenback moved sharply higher against the yen, which resulted in a breakout above the upper border of the declining trend channel. What does it mean for the exchange rate?

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

• EUR/USD: short (a stop-loss order at 1.1402; the initial downside target at 1.1009)
• GBP/USD: short (a stop-loss order at 1.3232; the initial downside target at 1.2375)
• USD/JPY: long (a stop-loss order at 107.62; the initial upside target at 113.08)
• USD/CAD: long (a stop-loss order at 1.2931; the initial upside target at 1.3436)
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the charts, we see that EUR/USD moved higher earlier today, but despite this move, the exchange rate is still trading in the blue consolidation. Therefore, our last commentary remains up-to-date:

(…) if the pair extends declines from current levels, the initial downside target will be around 1.1017, where the 38.2% Fibonacci retracement and the green support zone (marked on the daily chart) are.

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 1.1402 and the initial downside target at 1.1009) 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

Looking at the daily chart, we see that USD/JPY bounced off the support area created by the 76.4% and 78.6% Fibonacci retracements once again, which resulted in a breakout above the blue resistance line and a climb to slightly below the 50% Fibonacci retracement based on the recent downward move. Although this resistance level could trigger a pullback in the coming day(s), it seems to us that such decline will be nothing more than a verification of the earlier breakout above the blue line. If this is the case and USD/JPY reverses in this area and moves higher once again, the next upside target for currency bulls will be the orange resistance zone.

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

Trading position (short-term; our opinion): Long positions (with a stop-loss order at 107.62 and the initial upside target at 113.08) 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

The first thing that catches the eye on the weekly chart is an invalidation of the earlier breakdown under the red declining resistance line.

How did this move affect the very shrt-term picture? Let’s check.

From today’s point of view, we see that the green support zone created by the 76.4% and 78.6% Fibonacci retracements encouraged currency bulls to act, which resulted in a comeback above the red declining resistance line. Despite this improvement, currency bulls didn’t manage to hold gained levels, which resulted in a pullback earlier today. Taking this fact into account and combining it with the current position of the daily indictors, it seems to us that the exchange rate will re-test the strength of the green support zone in the coming week once again.

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. 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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