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

The dollar comes under pressure despite early gains, with the initial weakness for European currencies giving way to a resurgence despite the Italian referendum result.

Euro and dollar notes
Source: Bloomberg

EUR/USD rebounds after initial weakness

EUR/USD has seen sharp devaluation at the open, with the Italian referendum result heightening fears of yet another crisis in the eurozone. However, the pair is back on the attack, with a sharp appreciation looking to close the weekend gap.

Ultimately we need to see an hourly close above the $1.0686 level to start to look more bullish. Otherwise, there is a chance we could be seeing a short-term recovery before we move lower once more.

GBP/USD looks set for further gains

Despite weakness at the open, GBP/USD is back in the ascendancy as it seeks out the early high of $1.2738. The pair has enjoyed a particularly strong start to December, yet price is now moving closer to the crucial $1.2796 resistance level (July 2016 low). That represents a significant challenge to the recent rally.

As such, a bullish outlook remains, with an hourly close above $1.2738 providing a signal that another leg higher could be upon us. However, watch out for notable resistance at $1.2796. This bullish outlook would be negated with an hourly close below $1.2656.

USD/JPY breaking higher from wedge formation

USD/JPY is seemingly in the process of breaking higher from a recent period of weakness, with price breaking through trendline resistance. The key here is the ability to post an hourly close above ¥114.21, which would provide a strong bullish signal.

Given the wider uptrend over recent weeks, this bullish sentiment would coincide with a wider picture. However, a break below ¥113.34 would mark a continuation of recent weakness.

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