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 initial downside target at 1.3000)
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

Earlier today, EUR/USD increased, but despite this improvement, the exchange rate remains under the neck line of the head and shoulders formation (the blue resistance line). Therefore, we think that this upswing is nothing more than another verification of the earlier breakdown under this line. If this is the case, the pair will re-test the green horizontal support line based on the mid-August low in the coming days.

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

Trading position (short-term; our opinion): Short profitable positions (with a stop-loss order at 1.2250 and the initial downside target at 1.1510) 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 last commentary on this currency pair:

(…) taking into account the fact that the CCI and the Stochastic Oscillator generated buy signals, we think that further improvement is just around the corner – especially if USD/JPY moves higher from current levels and comes back to the consolidation, invalidating the earlier breakdown. If we see such price action, the next target for currency bulls will be the upper border of the consolidation and the October peak (around 113.23-113.41).

From today’s point of view, we see that the situation developed in line with the above scenario and USD/JPY moved sharply higher yesterday. Nevertheless, currency bulls didn’t manage to push the pair higher, which resulted in a reversal and a quite sharp decline. What’s next? If USD/JPY extends losses from current levels and drops below the purple support line based on the previous lows, we could see a head and shoulders formation and further deterioration in the following days. However, as long as there is no breakdown under this line, we don’t have a confirmation of the above and waiting at the sidelines for more bearish clues (as the abovementioned breakdown) is justified from the risk/reward perspective.

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 at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CHF

Last Friday, we wrote the following:

(…) it seems that we may see further improvement and a test of the previously-broken the lower border of the blue rising wedge (or even the upper border of the orange declining trend channel) in the coming week. Finishing today’s commentary on this currency pair, it seems to us that a re-test of the October peak in the coming days should not surprise us.

Looking at the above chart, we see that currency bulls pushed USD/CHF higher as we had expected. Thanks to recent increases, the exchange rate climbed to our upside targets and tested the October peak. As you see, this resistance successfully stopped further improvement, which resulted in a sharp decline earlier today. Thanks to this drop USD/CHF invalidated the earlier breakout above the upper border of the orange declining trend channel and the yellow resistance zone, which doesn’t bode well for currency bulls.

What’s next? Taking into account all the above, we think that we may see a post double top decline in the coming week. However, such price action will be likely and reliable only if the pair drops under the purple support line. If we see such bearish development currency bears could push the exchange rate even to the green support zone in the following days. Therefore, if we see a confirmation of the double top formation, we’ll likely open short positions. As always, we’ll keep you - our subscribers - informed should anything change.

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 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

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