Yesterday, the U.S. dollar moved sharply lower against the greenback which took USD/JPY below the previously-broken line – similarly to what we saw in the previous month. 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 1.2250; the initial downside target at 1.1510)
• GBP/USD: short (a stop-loss order at 1.3773; the next downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: long (a stop-loss order at 0.7410; the initial upside target at 0.7725)

EUR/USD

On Monday, we wrote the following:

(…) The current position of the daily indicators suggests that we may see further improvement in the very short term (…)

On the daily chart, we see that the situation developed in line with the above scenario and the euro moved sharply higher against the greenback yesterday. Earlier today, the exchange rate wavered between small gains and losses, but considering the buy signals, we think that the pair will test the upper border of the red declining trend channel in the coming day(s).

Trading position (short-term; our opinion): short positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1510) continue to be 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 Friday alert:

(…) the exchange rate will likely test the upper border of the purple rising trend channel, the yellow resistance zone and the orange declining resistance line seen on the weekly chart. However, taking into account the current position of the indicators, we think that further rally is not likely to be seen and we’ll see a reversal in this area in the coming week.

Looking at the daily chart, we see that although USD/JPY broke above the red declining resistance line, currency bulls didn’t manage to push the pair even to the first upside target. This show of their weakness encouraged their opponents to act and resulted in a sharp decline yesterday. Thanks to this drop the pair invalidated the earlier breakout above the red line, which suggests that we’ll see a test of the lower border of the purple rising trend channel soon (please note that this scenario is also reinforced by the sell signals generated by the daily indicators).

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

Looking at the above chart, we see that the overall situation hasn’t changed much as USD/CAD is still consolidating under the orange resistance zone, which means that our last commentary on this currency pair is up-to-date also today:

(…) the sell signals generated by the indicators suggest further deterioration. Nevertheless, in our opinion, as long as there is no drop below the Friday low of 1.2803, a bigger move to the downside is questionable and (…) one more upswing (…) should not surprise us in the coming days.

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