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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

EUR/USD – Reward for Bears

Currencies / Forex Trading May 24, 2018 - 08:51 AM GMT

By: Nadia_Simmons

Currencies

During the recent days, the euro extended losses against the greenback, which took EUR/USD to December 2017 lows and one more important support. What does it mean for the sellers?


EUR/USD – Bears vs. Retracement

Last Thursday, we wrote that (…)If (…) the pair drops once again, we’ll likely see a test of the mid-December lows (around 1.1732) in the coming day(s). (…)

From today’s point of view, we see that the situation developed in line with the above scenario and EUR/USD slipped to our downside target. Thanks to yesterday’s drop, the exchange rate also approached the 38.2% Fibonacci retracement (as seen on the weekly chart below), which encouraged currency bulls to act.

Additionally, all daily indicators generated buy signals, increasing the probability of further improvement in the coming days. Taking all the above into account, we believe that closing short positions and taking profits off the table is justified from the risk/reward perspective (as a reminder, we opened them a week ago when EUR/USD was trading at around 1.1919).

GBP/USD – Sellers Meet Support

Looking at the medium-term chart, we can notice some similarity to what we already saw in the case of EUR/USD. What do we mean by that? As you can see, GBP/USD also moved to the 38.2% Fibonacci retracement, which in combination with the current situation in the very short term suggests that higher values of the exchange rate are just around the corner.

From today’s point of view, we see that although the pair slipped under the green support zone, the above-mentioned 38.2% Fibonacci retracement (based on the entire 2017-2018 upward move) together with the upper line of the black triangle (marked with dashed lines) stopped the sellers, triggering a rebound.

Although the move is tiny (compared to the earlier declines), the current position of the daily indicators suggests that buy signals and further improvement should not surprise us in the coming days.

If this is the case and the pair moves higher from here, the first upside target will be around 1.3570-1.3616, where the early May highs are. If we see a breakout above this resistance area, we’ll consider opening long positions. We will keep our subscribers informed should anything change, or should we see a confirmation/invalidation of the above.

USD/JPY – Breakout or Fakeout?

In our last commentary on this currency pair, we wrote that (…) the buy signals generated by the indicators continue to support the buyers, which suggests that one more upswing and a test of the 61.8% Fibonacci retracement should not surprise us. Nevertheless, the current position of all daily indicators (they remain in their overbought areas) indicates that the space for gains may be limited and it’s worth to keep an eye on currency bulls’ behavior, because any show of their weakness could trigger a pullback in the coming days.

As you can see on the daily chart, currency bulls pushed the pair higher (as we had expected) and USD/JPY broke above the 61.8% Fibonacci retracement yesterday. Although this was a positive event, the proximity to the upper line of the purple rising wedge and the long-term resistance line (marked on the weekly chart below) encouraged the sellers to act earlier today.

Additionally, all daily indicators are very close to generating sell signals, increasing the probability of reversal in the very near future.

Looking at the above chart, we see that thanks to the recent increase, USD/JPY approached the orange declining resistance line, which stopped currency bulls many times in the past (in December 2016, January 2017, November 2017 and also last December).

 Therefore, even if the exchange rate moves a bit higher from here, the space for rally seems limited. We will keep our subscribers informed if anything changes, or should we see a confirmation/invalidation of the above.

If you enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Oil Trading Alerts as well as Gold & Silver Trading Alerts. Sign up now.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski
Founder, Editor-in-chief

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Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


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