For almost two weeks GBP/USD is testing investors’ patience, fluctuating in a very narrow range. Does this mean that the forces of buyers and sellers started to level off or maybe this is just a stop before the next move to the downside?

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

• EUR/USD: small short positions (a stop-loss order at 1.2000; the next downside target at 1.1735)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Yesterday, we wrote the following:

(…) What’s next? Taking into account Tuesday’s sellers’ strength and the (…) sell signal generated by the Stochastic Oscillator, we think that EUR/USD will extend losses and test our next downside target (…) around 1.1767-1.1790, where the support area created by the 76.4% and 78.6% retracements is.

Looking at the daily chart, we see that EUR/USD extended losses (as we had expected) and reached our next downside target. Although the pair could rebound from here, there are no buy signals at the moment of writing these words, which suggests that one more downswing may be still ahead of us.

If this is the case and the pair drops once again, we’ll likely see a test of the mid-December lows (around 1.1732) in the coming day(s). Taking all the above into account, we decided to lower our next downside target once again to 1.1735 and the stop-loss order to 1.2000. We will keep you informed should anything change.

Trading position (short-term; our opinion): Small short positions (with a stop-loss order at 1. 2000 and the next downside target at 1.1735) 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

Although GBP/USD moved a bit lower earlier today, the exchange rate is still consolidating inside the green support zone, which means that what we wrote on Friday on this currency pair is up-to-date also today:

(…) GBP/USD wavers between tiny gains and losses around the green support zone created by the September, December and early January highs.

Additionally, this area is also reinforced by the 38.2% Fibonacci retracement (based on the entire 2017-2018 upward move), the blue support line based on the previous lows and the upper line of the black triangle (marked with dashed lines) which together continue to keep declines in check.

On top of that, when we take a closer look at the long-term chart below, we can notice that the pair is also trading in a consolidation (marked with blue), which increases the probability that we won’t see a bigger move to the downside as long as currency bears manage to break successfully under the lower border of the formation.

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

As you see on the daily chart, USD/JPY extended gains earlier today, which resulted in a climb to the resistance zone created by the February highs (we marked them with green horizontal lines) and the blue declining resistance line.

Despite this fact, the buy signals generated by the indicators continue to support the buyers, which suggests that one more upswing and a test of the 61.8% Fibonacci retracement should not surprise us. Nevertheless, the current position of all daily indicators (they remain in their overbought areas) indicates that the space for gains may be limited and it’s worth to keep an eye on currency bulls’ behavior, because any show of their weakness could trigger a pullback in the coming days.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

Thank you.

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

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