Earlier today, currency bulls pushed the greenback higher against the yen, which resulted in a test of the medium-term resistance line. Will it manage to stop the byers or maybe we see another breakout above it in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
On Thursday, we wrote the following:
(…) higher values of the exchange rate are ahead of us – especially when we factor in the buy signals generated by the indicators.
How high could the pair go in the coming days?
In our opinion, the first upside target will be around 1.1755, where the 23.6% Fibonacci retracement based on the entire 2018 decline is. If it is broken, we may see a move even to the yellow resistance zone, which is currently reinforced by the next retracement (around 1.1907).
Looking at the daily chart, we see that despite Monday’s downswing, the situation developed in line with the above scenario and the exchange rate broke above our firth upside target earlier today. Taking this fact into account and the lack of the sell signals, we think that further improvement and a test of the May 22 high (or even our next upside target from Thursday’s alert) is very likely.
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.
GBP/USD
Although GBP/USD pulled back on Monday, the previously-broken upper border of the black triangle (marked with dashed lines) stopped further declines. Yesterday, this positive event encouraged currency bulls to act, which resulted in further improvement.
Taking the above into account, and combining with the lack of the sell signals generated by the daily indicators, we believe that what we wrote on Thursday on this currency pair is still valid:
(…) the situation developed in line with our assumptions, which just like in the case of EUR/USD, suggests higher values of the exchange rate in the very near future.
If this is the case and the pair extends gains, we’ll likely see a test of the previously-broken yellow resistance zone, which is currently reinforced by the 23.6% Fibonacci retracement based on the entire downward move, which started in mid-April.
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
Quoting our Monday’s alert:
(…) the situation developed in line with the last week’s assumptions and USD/JPY approached our first upside target. Nevertheless, similarly to what we wrote about the current position of the daily indicators in the case of EUR/USD and GBP/USD, there are no sell signals, which suggests that one more move to the upside can’t be ruled out.
What could this mean for USD/ JPY? In our opinion, a test of the blue declining resistance line based on the November 2017 and January 2018 peaks (currently around 110.08) in the coming days.
From today’s point of view, we see that the situation developed in tune with our assumptions and currency bulls took USD/JPY higher once again. Thanks to their today’s action the exchange rate tested our upside target and pulled back.
Taking this fact and the current position of the daily indicators into account, we think that reversal may be just around the corner. If this is the case and we see currency bulls’ weakness during today’s or tomorrow’s session, we’ll consider opening short positions.
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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