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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

FX levels to watch – EUR/USD, GBP/USD, USD/JPY

Signs of a bullish reversal for EUR/USD point toward the potential for a recovery in GBP/USD too. With USD/JPY looking bearish, it seems the dollar could come under pressure this week.

US dollar and Japanese yen notes
Source: Bloomberg

EUR/USD rallies through crucial resistance level

EUR/USD is pushing through the $1.0630 resistance level this morning, following on from last week’s pullback into the $1.0494 support level. The fact we matched but failed to break through that support level was telling, providing the potential for a double bottom. That pattern has now been completed, with the pair now looking likely to gain further as the week progresses. 

GBP/USD retracing Friday’s gains

GBP/USD managed to regain some ground on Friday, following a sharp deterioration in the early part of last week. Crucially, we have not broken through the $1.2308 resistance level yet, thus bringing about the chance of further downside.

That said, with EUR/USD breaking higher in such a convincing manner, it may be a matter of time before we see this pair push through $1.2308 too. Should that occur, then we could be looking at a bullish phase for this pair. However, until then, the short-term downtrend remains valid. 

USD/JPY pulling back from deep retracement

USD/JPY is selling off sharply following Friday’s top, which saw yet another very deep retracement, rallying through the 76.4% pullback. However, with price falling short of the ¥114.96 level, there is a good chance we will see a fairly prolonged period of weakness at the beginning of the week.

With that in mind, watch out for further downside. As the price failed to break below ¥111.60 last week, there is a potential for a wider bullish reversal in play, which would point towards this sell-off perhaps failing to break back below ¥111.69.

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