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

While the dollar has been turning higher, there is reason to believe this is going to provide us with another shorting opportunity. Meanwhile, EUR/GBP looks set for a break higher.

EUR/USD drifts towards key support level

EUR/USD has been pulling back since posting a deep retracement late last week. That lower high would be confirmed as a bearish shift, with a break and hourly close below $1.2364.

Bearing in mind the wider uptrend for the pair, any further downside would only be seen as a retracement of the $1.2165-$1.2538 rally, with $1.2165 needed to be taken out to negate the wider bullish view. However, for the short term, the ability to break below the $1.2165 level will be the main determinant of whether we see a deeper retracement or not.

EUR/GBP looks set for a resurgence

EUR/GBP is back up at a crucial resistance zone this morning, following a higher low formed on Friday. This comes off the back of a rally from the £0.8689 low, established on 8 December.

With a descending channel in place over the past four months, there is a good chance we will see a week of gains ahead, as the price moves towards the upper thresholds of around £0.8900. For that bullish outlook to come into play, we need to see the price push through the £0.8796 mark. 

USD/JPY retracing higher within downtrend

USD/JPY fell back into the downtrend last week, despite a boost on Thursday. The subsequent 76.4% retracement led to a new four-month low.

While we are seeing the price move higher this morning, this is likely to be another retracement before we turn lower yet again. As such, look out for the 61.8-76.4% retracement zone (¥109.09-¥109.28) as an area for shorts. This bearish outlook remains in place, unless the price rallies through ¥109.59.

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