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

Dollar strength is in focus, with EUR/USD and GBP/USD looking for further downside while USD/JPY shows signs of a potential medium-term reversal.

Dollar and yen notes
Source: Bloomberg

EUR/USD begins to turn lower once more

EUR/USD turned lower yesterday, following on from a rally into trendline resistance earlier in the week. That said, the one key hurdle to get past for a continuation of the sell-off would come at $1.1189, which now forms a double top pattern.

As such, while a bearish outlook remains, any new positions would make sense upon seeing an hourly close below $1.1189 to lessen the potential for another bounce. We would need to see an hourly close above $1.1239 to negate this bearish view.

EUR/USD price chart

GBP/USD posts swing high following bounce

Yesterday saw IN_GBPUSD gain ground somewhat and while this may be a countertrend move, it is a useful one as it finally provides us with a key swing high to utilise. As such, an hourly close below $1.2685 would provide a bearish continuation signal, while an hourly close above $1.2771 would point towards a more protracted bounce in the pair.

The fact that we have broken to new 31-year lows and into relatively clear air, a continuation of the downtrend is the favoured outcome.

GBP/USD price chart

USD/JPY showing signs of potential trend change

IN_USDJPY is breaking higher once more, with the pair having experienced a particularly strong period in October so far. Crucially, we have broken through a 10-month trendline resistance, which could highlight a potential bullish trend change for the pair.

The key event that would point to a wider and longer-term reversal would be a closed daily candle above ¥104.32. However, for the short-term we have a clear uptrend in place which is showing little signs of letting up. Overnight support has come at the important mid-September high of ¥103.35 and for this short-term rally to be negated, we would need to see an hourly close below that level.

Until that occurs, further gains are likely, where a break above ¥104.32 would be the key to further upside.

USD/JPY price 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.