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

Yesterday’s FOMC statement sends the dollar downwards, sparking rallies for GBP/USD and EUR/USD, while USD/JPY sold off. However, there is reason to believe these moves could be in the process of turning around.

US dollar and Japanese yen
Source: Bloomberg

EUR/USD rallies out of downtrend
Yesterday’s FOMC statement sent EUR/USD flying, with the pair gaining heavily overnight. Crucially, we have seen price break into the 76.4% retracement of a wider move and as such, there is a strong chance we will see the pair begin to weaken from here.

Ultimately, it is a case of trying to pick through the different timeframe moves and while key resistance levels have been broken on the intraday markets, the key swing highs of $1.1186 and $1.1165 remain in a pattern of lower highs. As such, a bearish view is in place unless we see a break through $1.1165.

EUR/USD chart

GBP/USD finds support on previous resistance
IN_GBPUSD has broken through the $1.3165 resistance level, with price coming back for a retest this morning. That points towards the potential for further gains, with $1.3250 the next important resistance level.

Crucially, we would need to see a push through $1.3289 to negate the wider descending triangle pattern in play. As such, while it looks like we could see further upside in the short-term, the $1.3238 level represents an interesting area for shorts based on the notion that we will return to the bottom of this triangle rather than break through $1.3289 resistance.

GBP/USD chart

USD/JPY weakness could come to a halt
Yesterday’s bearish IN_USDJPY view played out well, with the FOMC statement providing a sharp depreciation in the pair. However, we have since seen a move back into the 76.4% retracement, with a bullish descending wedge pattern coming close to conclusion.

With the Bank of Japan up ahead, it is likely that USD/JPY shorts could be trimmed in anticipation of easing. With that in mind, there is a good chance we could see this sell-off come under pressure, where an hourly close above ¥105.07 provides a clue that this weakness is over, given the completion of the wedge pattern.

Until that happens, there is still a chance of further downside in accordance with the weakness evident over the past week.

USD/JPY chart

The information 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 Bank S.A. 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 and as such is considered to be a marketing communication.

Find articles by analysts