Despite the Thursday’s closure below the lower border of the consolidation and the Friday’s drop to the lowest level for more than two weeks, the bulls kept cool and reborn in recent days, erasing almost entire recent move to the downside. Will the pro-growth formation that is drawing on the horizon encourage them to fight for higher values of USD/JPY in the coming days?
EUR/USD – Similarity to July
Although EUR/USD moved a bit higher earlier today, the upper border of the red declining trend channel stopped the buyers once again, triggering another pullback.
When we take a closer look at the daily chart, we clearly see that similar situation we observed at the end of July, which increases the probability that the next bigger move will be to the downside and lower values of the exchange rate are just around the corner.
Taking all the above into account, we believe that one more test of the blue dashed horizontal line is more likely than not (as a reminder, this is a potential neck line of the head and shoulders top formation).
What could happen if we see a breakdown under this support?
In our opinion, EUR/USD will extend its decline not only to our initial downside target but will also test the recent lows (in terms of daily closures) or even the lower line of the red declining trend channel in the following days.
USD/JPY – Chance for Bulls
On Friday, the exchange rate invalidated the Thursday’s breakdown under the lower border of the blue consolidation, which encouraged currency bulls to act.
Earlier today, USD/JPY extended gains, which suggests that we’ll see a realization of yesterday’s scenario (an increase to at least the upper border of the above-mentioned formation) in the very near future. Nevertheless, before we see such price action, the buyers will have to break above the red declining resistance line based on August peaks.
How important could this line be for the future of the bulls?
