During the last session of the previous week, currency bulls broke above the resistance area, which has been holding increases for over a month. Is this success enough to climb higher in the coming week?

• EUR/USD: short (a stop-loss order at 1.1878; the initial downside target at 1.1343)
• GBP/USD: short (a stop-loss order at 1.3377; the initial downside target at 1.2923)
• USD/JPY: long (a stop-loss order at 111.11; the initial upside target at 113.40)
• USD/CAD: none
• USD/CHF: none
• AUD/USD: short (with a stop-loss order at 0.7208; the initial downside target at 0.7051)

EUR/USD

Although EUR/USD tested the strength of the early-October low and the green zone on Friday, the combination of these supports encouraged the buyers to fight for higher values of the exchange rate.

As a result, the pair increased and climbed to the previously-broken upper border of the red declining trend channel, but then pulled back a bit and closed the day below it. Earlier today, currency bulls tried to go to the north once again, but their opponents stopped them, triggering a decline, which took EUR/USD under the red line.

Such price action suggests another invalidation of the earlier tiny breakout (if the pair closes today’s session inside the red channel), which will likely translate into further deterioration in the coming week.

If this is the case and the exchange rate extends losses from current levels, the sellers will re-test the green support zone in the very near future. If it is broken, the next target will be around 1.1372, where the size of the downward move will correspond to the height of the green rising wedge.

Trading position (short-term; our opinion): Profitable short positions with a stop-loss order at 1.1878 and the initial downside target at 1.1343 are justified from the risk/reward perspective.

USD/JPY

Looking at the daily chart, we see that USD/JPY moved lower on Thursday, but the buy signals generated by the indicators in combination with the proximity to the lower border of the brown rising trend channel encouraged currency bulls for another trip to the north.

Thanks to these circumstances, the exchange rate erased the last week’s pullback and hit a fresh weekly high, breaking above the 38.2% Fibonacci retracement and making our long positions profitable earlier today.

What’s next for USD/JPY?

Taking into account today’s breakout and the lack of sell signals, we think that the pair will extend gains and increase to at least the upper line of the very short-term green rising trend channel (currently around 113.15). However, if it is broken, the bulls will likely test of the previously-broken upper line of the brown rising trend channel (or even the orange resistance zone marked on the weekly chart) in the following days.

Trading position (short-term; our opinion): Profitable long positions with a stop-loss order at 111.11 and the initial upside target at 113.40 are justified from the risk/reward perspective.

USD/CAD

In our last commentary on this currency pair, we wrote:

(…) What’s next? The buy signal generated by the Stochastic Oscillator suggests that the buyers will try to push the pair higher (maybe even to the upper border of the red declining trend channel). However, we think that as long as there is not successful breakout above the yellow area higher values of USD/CAD are questionable.

From today’s point of view, we see that the situation developed in line with the above scenario and USD/CAD reached our upside target during Friday’s session. Although there was a tiny (barely visible from this perspective) breakout above the red line, it was very temporary, and the pair finished the week inside the red channel.

Earlier today, we haven’t seen any important breakout/breakdown, which could change the overall situation. Therefore, as long as there is no breakout above the channel or an invalidation of the breakout above the yellow area a bigger move in any direction is not likely to be seen.

Nevertheless, we should keep in mind that the CCI and the Stochastic Oscillator are very close to generating sell signals, which could translate into lower values of USD/CAD in the coming week – especially if the bulls show weakness at current levels.

If the situation develops in tune with the above assumptions, we’ll consider opening short positions. As always, we’ll keep you - our subscribers - informed should anything change.

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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