Yesterday, the greenback moved lower against the yen, which pushed USD/JPY to the previously-broken upper border of the declining trend channel. Earlier today, this support didn’t withstand the selling pressure, which resulted in a fresh August low. How low could the exchange rate go in the coming days?

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

• EUR/USD: none
• GBP/USD: short (a stop-loss order at 1.3272; the initial downside target at 1.2375)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Looking at the charts, we see that EUR/USD moved lower earlier this week, which resulted in a pullback and invalidation of the earlier breakout above the 38.2% Fibonacci retracement and the 112.8% Fibonacci extension. Although this is a negative development, in our opinion, it will turn into bearish only if EUR/USD closes this week below these levels. Until this time one more move to the upside can’t be ruled out.

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

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. Nevertheless, if we see reliable bearish factors on the horizon, we’ll consider opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/JPY

A week ago, we wrote the following:

(…) the size of the move is smaller than the last week’s rebound, which doesn’t confirm currency bulls’ strength at the moment and suggests that one more move to the downside (and at least a test of the recent lows) can’t be ruled out.

From today’s point of view, we see that the yellow resistance zone stopped further improvement and currency bears pushed the exchange rate lower as we had expected. Thanks to today’s decline USD/JPY not only tested, but also broke below the recent lows, which means that we’ll see a realization of our bearish scenario from our Forex Trading Alert posted on August 2, 2017:

(…) What could happen if USD/JPY drops under the 76.4% and 78.6% Fibonacci retracements? In our opinion, we may see a drop to around 109.46, where the upper border of the next green support zone and the medium-term green support line based on the previous lows are.

Finishing today’s commentary on this currency pair please note that if the above-mentioned green zone is broken, the way to the mid-June low will be open.

Very short-term outlook: bearish
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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

AUD/USD

Quoting our last commentary on this currency pair:

(…) although AUD/USD moved higher earlier this week, the orange resistance zone (created by the 50% Fibonacci retracement and May 2015 highs) continues to keep gains in check. Therefore, (…), the space for another upswing seems limited (…)

Looking at the weekly chart, we see that the above-mentioned resistance zone encouraged currency bears to act, which resulted in a pullback to the previously-broken yellow zone based on the mid-April and November 2016 highs. This suggests that as long as there is no drop below these levels and invalidation of the breakout above then another sizable move to the downside is not likely to be seen. Nevertheless, if we see such decline, we’ll consider opening short positions.

Very short-term outlook: mixed
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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