FX levels to watch: EUR/USD, GBP/USD and USD/JPY
The dollar has come under increasing pressure as the week goes on, with the Fed’s rate rise overshadowed by a slower future rate pathway. Is this the beginning of a wider phase of dollar weakness or merely a fleeting shift?
EUR/USD showing signs of bullish recovery
EUR/USD has managed to rally into the $1.1475 swing high, following a decline which failed to break below the $1.1267 swing low.
This provides a bullish signal to show a potential wider bullish phase coming into play after a period of consolidation taking place throughout the past two months. For the near term, watch out for the continued creation of higher lows as a signal of further upside, where a break out of that pattern points towards a retracement of the rally from the $1.127 low.
GBP/USD runs into notable trendline resistance
GBP/USD has been on the rise, with the pair reaching trendline resistance that has dated back to late November. The ability to break through this trendline could provide greater clues as to whether we will continue to trend higher or not.
The trend has been certainly negative over the past two months and, with a bearish rising wedge pattern coming into play, it looks likely we will start to weaken from the confluence of this descending trendline and rising wedge. As such, watch out for a potential bearish shift, with a break below $1.2608 providing confirmation of such an impending breakdown.
USD/JPY declines take us into daily confluence
USD/JPY has been declining sharply over the course of the week, with the breakdown falling pat the ¥112.20 zone to set a three-month low. The daily chart below highlights the importance of the low produced yesterday, with the price bottoming out at the point where the 200-day simple moving average (SMA) meets the 76.4% Fibonacci retracement.
Given the wider trend of higher highs and higher lows, there is a strong chance that we are currently seeing a retracement of the rally from ¥109.77 to ¥114.55. As such, watch for a potential break through the most recent intraday swing high (currently ¥111.46) as a signal that the pair is starting to turn back around. Conversely, a break below that ¥110.90 level could signal a wider bearish move in play.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
See an opportunity to trade?
Go long or short on more than 16,000 markets with IG.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets