The USD/JPY has reversed from highs achieved a couple of days ago, but remains stubbornly perched within the loftier part of its long term range.

The USD/JPY is trading near the 1.36700 vicinity as of this writing.  On the 23^rd of August the USD/JPY currency pair managed to attain a high of nearly 1.37700 and this wasn’t a momentary spike. From the 19^th until yesterday the USD/JPY has managed to consistently trade above the 1.37000 level with rapid fire price action. In early trading this morning the USD/JPY has moved slightly lower, but this bearish trend may prove short lived.

The USD/JPY Continues to Demonstrate a Bullish Price Range

The USD/JPY will remain speculative and traders need to be careful.  Experienced traders however already know that. The trick to the puzzle is understanding the USD/JPY has been consistently testing its upper range and strong reversals lower have not proven durable as of yet.

Fundamental economic data and actions via central banks like the BoJ and Fed continue to prove rather unimpressive. Growth challenges, inflation and interest rate policies remain hot topics of debate with no clear answers to resolve matters.

The 1.37000 looms over the USD/JPY with a very evident psychological threshold. The ability to break below this juncture this morning is noteworthy, but from a risk reward perspective via trading does downside ability look more attractive than potential upside movement in the near term? A retest of the 1.37000 level in the short term might prove to be a significant buying signal for quick hitting momentum trades with realistic targets.

Some Traders Believe the USD/JPY is overbought, is this Viewpoint Wrong?

Conservative speculators should be cautious considering the amount of nervous sentiment in the USD/JPY and the amount of data and news events which will unfold the next two days. However traders who are seeking wagering opportunities may view the coming storm as a chance to dive in and test their perspectives.

If current support levels near the 1.36600 to 1.36550 ratios hold water, this may prove to be place to ignite buying positions which seek higher ground.  Trading conditions will prove to be fast the remainder of the week and risk management is essential. The incremental climb upwards in the USD/JPY may not be finished yet.

USD/JPY Short Term Outlook:

Current Resistance: 136.850

Current Support: 136.490

High Target: 137.510

Low Target: 136.080

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The USD/BRL has displayed ability to move slightly upwards the past day of trading, but technically the forex pair remains within sight of near term support.

Speculators who want to wager on the USD/BRL via trading today will have plenty of technical considerations to make. The USD/BRL has proven its long term ability to open the day’s trading with vivid gaps, so speculators should monitor the start of the day. Yesterday’s closing price for the USD/BRL currency pair was near 5.1450, which essentially places price action near the upper realms of its five day chart.

However, even as the USD/BRL has accomplished a slight bullish run and been able to sustain the ‘highs’, the forex pair actually has shown ability to incrementally trade lower in the past month. The notion that the financial world is now within the dog days of summer in the northern hemisphere should be taken into consideration, because trends sometimes can prove to be illusions this time of year – meaning they are short lived. Yet, the USD/BRL has mirrored many other major currencies the past handful of weeks and shown some bearish tendencies.

Recent Move Higher may have some Staying Power, but it could also prove to be False

On the 3^rd of August the USD/BRL was trading near the 5.31000 ratio. On the 21^st of July the USD/BRL was near the 5.5200 mark. This decline in price for the USD/BRL currency pair has created a rather incremental pattern. Yes, reversals have been seen, but resistance levels have lowered for nearly a month.

• Resistance near the 5.1600 level should be watched near term, if this level proves strong and is not penetrated higher, additional selling of the USD/BRL could be sparked.
• Today’s opening should be watched closely, a move higher may make sellers nervous, but if price action is consolidated or a move lower occurs early this could be polite bearish signal.

Reversals are certain to occur in the USD/BRL as the Trading Range is Tested Short Term

The USD/BRL is likely to present traders with a solid speculative opportunity today.  With near term resistance levels within sight near the 5.1600 to 5.1700 marks, traders will want to see if these ratios can prove durable. If the higher levels prove strong additional selling may occur on the notion the trend for the USD/BRL remains bearish.

A move above the higher relatively close resistance levels could set off volatility in the near term. However, the last time the USD/BRL traded above the 5.2000 level was on the 5^th of August. If the USD/BRL opens with a slightly lower move, but remains above the 5.1400 mark this could entice bearish traders to aim for the 5.1350 to 5.1275 prices. Entry orders should be used with the USD/BRL and solid risk management is essential.

Brazilian Real Short-Term Outlook

Current Resistance:  5.1496

Current Support:  5.1342

High Target: 5.1639

Low Target:  5.1148

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The recent signals from the Bank of England about the future of raising interest rates brought the GBP/USD exchange rate more bearish momentum in the past week. The currency pair tried to rebound higher, but its gains did not exceed 1.3182. It then returned to close the week’s trading near the support level 1.3086, closer to breaching the psychological support 1.3000. The pound was one of several smaller currencies that benefited from the waning of the US dollar’s dominance of central bank foreign exchange reserves late last year, according to newly released International Monetary Fund data, but the overall basket may look very different after that time.

Central banks bought more currency reserves last quarter, raising the total value of reserves allocated by about 0.7% to just over $12.05 trillion in the IMF’s latest report on the composition of foreign exchange reserves. Despite a growing basket, the share of the US dollar fell to 58.81% from 59.21% in the previous three months, bringing to a new all-time low.

When measured in US dollars rather than as a percentage of the basket, the Canadian dollar saw the fastest growth while its holdings of the renminbi, the pound sterling, the Swiss franc and “other currencies” rose as well. However, last quarter’s scroll order was affected by changes in the value of each currency relative to the dollar, and in addition to the performance of each country’s government bond markets, so it is not necessarily an accurate reflection of the allocation change.

Given that the dollar, the euro, the yen, the British pound and the renminbi account for the bulk of all reserves, it is almost inevitable that any sale in the first quarter would have been concentrated in these currencies, and this has led to a decline in their respective shares in the basket during that period.

Final survey data from S&P Global on Friday showed that growth in UK manufacturing activity moderated significantly in March, reflecting persistent supply shortages, increased caution among customers, escalating inflationary pressures and geopolitical tensions. Accordingly, the S&P Global / Chartered Manufacturing Purchasing Managers’ Index fell to 55.2 in March from 58.0 in February. The expected reading was 55.5.

All five sub-components of the PMI had a negative impact on its March level. Industrial production grew at the slowest pace in five months in March. New orders grew at the slowest pace during the current 14-month increase streak in March. Meanwhile, export orders contracted for the sixth time in the past seven months. Inflationary pressures increased in March. Input price inflation hit its highest level in three months. Average selling prices also rose at the fastest pace in three months. Sellers’ lead time has been extended for the 33rd consecutive month and again to one of the largest ranges in survey history. Employment expanded for the fifteenth consecutive month.

Finally, manufacturers maintained a positive outlook in March, with more than 55 percent expecting production to rise over the next 12 months.

On the daily chart below, the price performance of the GBP/USD currency pair appears to be forming a head and shoulders after the failure of the recent rebound attempts. Continuation of the formation may push the bears to breach the 1.3000 psychological support. After the recent disappointment with the future of the Bank of England’s policy, the momentum of the US dollar will be stronger regarding the future of raising interest rates, which will put pressure on any attempts by the GBP/USD to rebound higher. The closest resistance levels for the pair are currently 1.3185, 1.3230 and 1.3300.

I confirm now that the breach of the 1.3335 resistance is important for the bulls to continue controlling the trend.