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

Dollar weakness paves the way for European strength. However, GBP/USD is showing potential signs of weakness ahead of the Bank of England meeting.

Pound coin and dollar notes
Source: Bloomberg

EURUSD consolidates following sharp rally
EUR/USD has managed to rally sharply out of its downtrend, with the break through the $1.1165 level in particular sparking a more bullish outlook. This morning has seen price fall through pennant support.

However, we seem likely to be within a retracement and as such further gains are likely before long. The signal that this pennant break has been negated would be an hourly close above $1.1198. Until that occurs, we could be in for a deeper pullback, where Fibonacci support comes into view.

Will GBP/USD rally come under pressure?
IN_GBPUSD has seen a period of strength over the past three trading days, with Friday seeing a temporary spike through the crucial $1.3289 level.

We are seeing trendline support being broken currently, yet the key here is whether we see the pair post an hourly close below $1.3200. Given the lower high posted this morning, a move below the $1.3200 level would provide a bearish signal for a move back towards $1.3150 and $1.3117 support.

The bullish short-term trend would be brought back into play with a push above Friday’s high of $1.3300.

USD/JPY consolidating within downtrend
IN_USDJPY has rallied this morning, in a retracement of the sharp deterioration seen on Friday post-Bank of Japan. This weakness looks set to continue and as such, we are looking for another leg lower.

Current price action looks like a possible intraday double top formed this morning, with an hourly close below ¥102.30 providing the bearish signal for another leg lower.

Conversely, an hourly close above ¥102.68 would provide a signal that we could see a deeper retracement with ¥103.50 of particular interest. 

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