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

Signs of a bullish reversal for EUR/USD point toward the potential for a recovery in GBP/USD too. With USD/JPY looking bearish, it seems the dollar could come under pressure this week.

US dollar and Japanese yen notes
Source: Bloomberg

EUR/USD rallies through crucial resistance level

EUR/USD is pushing through the $1.0630 resistance level this morning, following on from last week’s pullback into the $1.0494 support level. The fact we matched but failed to break through that support level was telling, providing the potential for a double bottom. That pattern has now been completed, with the pair now looking likely to gain further as the week progresses. 

GBP/USD retracing Friday’s gains

GBP/USD managed to regain some ground on Friday, following a sharp deterioration in the early part of last week. Crucially, we have not broken through the $1.2308 resistance level yet, thus bringing about the chance of further downside.

That said, with EUR/USD breaking higher in such a convincing manner, it may be a matter of time before we see this pair push through $1.2308 too. Should that occur, then we could be looking at a bullish phase for this pair. However, until then, the short-term downtrend remains valid. 

USD/JPY pulling back from deep retracement

USD/JPY is selling off sharply following Friday’s top, which saw yet another very deep retracement, rallying through the 76.4% pullback. However, with price falling short of the ¥114.96 level, there is a good chance we will see a fairly prolonged period of weakness at the beginning of the week.

With that in mind, watch out for further downside. As the price failed to break below ¥111.60 last week, there is a potential for a wider bullish reversal in play, which would point towards this sell-off perhaps failing to break back below ¥111.69.

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