Week Ahead: Forex Markets Analysis - EUR/USD, USD/JPY

Volatility in most of the commonly traded forex pairs has slowed to the minimum levels that are often seen as we head into the late parts of summer. 

The PowerShares DB US Dollar Index Bullish ETF UUP has maintained its relatively elevated levels and Guggenheim CurrencyShares Euro Trust FXE has taken on most of the responsibility as the asset party being sold. 

Lately, a majority of the moves in the market have been dictated by geopolitical concerns in the Ukraine, Gaza, and Iraq.  This has brought a lift to the safe haven currencies and led investors to shun the more problematic regions like the Eurozone --at least for the short term. 

Ahead this week, we will have some critical data released and this will include the minutes from the latest monetary policy meeting at the US Federal Reserve.  These developments will be discussed on TradeSpoonin looking at new trading opportunities.

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EUR/USD - Euro vs. US Dollar

Critical Resistance:   1.3510

Critical Support:   1.3230

Trading Bias:  Bearish on Rallies

(Chart Source:  CornerTrader)

EUR/USD Forex Strategy:  Sell rallies into support turned resistance at 1.3510, buy dips into long-term Fib support at 1.3230. 

The medium term downtrend in the EUR/USD is starting to slow in momentum.  But the direction is still very clear, as the pairhas managed to now break important Fibonacci support in the 1.3380 area.  For next week’s trading, we are likely to see a moderately sideways bias as the indicator readings continue to unwind after falling into oversold levels.  One possible strategy here is to use the RSI indicator and determine when prices have risen back into overbought territory.  This is likely to occur near the point of shorter term resistance in the upper 1.34 and this area offers some good risk to reward opportunities for new short positions.

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USD/JPY - US Dollar vs. Japanese Yen

Critical Resistance:   103.10

Critical Support:   100.80

Trading Bias:  Long Term Bullish

USD/JPY Forex Strategy:  Continue to trade the range from the bullish side, buying dips near 101.  Stop losses can be still be set below 100.80 support.  Descending triangle still main price pattern.

The USD/JPY is still consolidating in its long term sideways range, and its support and resistance levels are still seen tightening near 102.  Consolidation patterns essentially signal a buildup of energy that cannot trade permanently so it is a good idea to start to looking for signs of a breakout.  Last week, we wrote that “The balance of the evidence continues to favor the upside, as support at 100.80 as held on three separate occasions (creating a triple bottom).”  This outlook continues to remain valid, and the first bull target rests at 103.10.