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

The dollar surge is taking a breather this morning. However, with downtrends in play for EUR/USD, GBP/USD and AUD/USD, it is likely we will see further selling take hold before long.

EUR/USD decline intensifies after support break

EUR/USD has been selling off sharply since breaking below the $1.2154 support level last week. Yesterday’s price action was no different, with the price falling below the 200-day simple moving average (SMA).

This morning has seen a brief respite from that intense selling, with the pair rising into what looks like another retracement. The middle Bollinger band has provided us with a reliable resistance indicator of late, and this is likely to be the case should the price rally that far. As such, look out for a potential shorting opportunity at the middle Bollinger band, which coincides with the 50% retracement. A bearish outlook remains unless we see a break back above the $1.2139 swing high.

GBP/USD upside unlikely to last

GBP/USD is similarly rising against the trend, with the recent downtrend likely to come back into play before long. The price has rarely broken above the middle Bollinger band over the past fortnight, so it is likely we will see this indicator limit any upside.

Ultimately, $1.3998 is the most important swing high that must be overcome to negate the bearish view. However, given the recent trend, it seems likely we will break above the near-term area of resistance at $1.3800, given the need to break heavily through the middle Bollinger band.

AUD/USD rallying after break below crucial support level

AUD/USD is also gaining ground this morning, with the price pushing back above the crucial $0.7501 level. That level negated a long-term uptrend, completing a double top formation evident on the weekly timeframe. This points towards the potential for a major breakdown for the pair.

However, it is also worth noting that we could see a fakeout, and as such, another leg lower would provide strong confidence that we are going to continue this downtrend of late. In the meantime, with the price rallying towards the deeper retracements, watch for a potential breakdown from Fibonacci resistance. A deeper short entry would compensate for the risk associated with taking a position at such a pivotal area of support as this.

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