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

The dollar seems to be back in control, with EUR/USD, GBP/USD, and AUD/USD all selling off sharply in the wake of yesterday’s ECB meeting. 

Euro and dollar
Source: Bloomberg

EUR/USD falls below head and shoulders neckline

EUR/USD fell sharply yesterday in the wake of the latest European Central Bank (ECB) meeting, taking the price back below the crucial $1.1662 support level. That level is key, because it denotes a head and shoulders neckline on the wider daily timeframe. With that in mind, this provides us with a clear bearish bias to play with.

Given how extended this downside move is, it makes sense to await a retracement of yesterday’s sell-off, or else a continuation pattern such as a pennant or flag to trade around. Ultimately further downside is expected, but with our most recent swing high all the way up at $1.1837, it makes sense to see if we can get some form of consolidation or retracement to provide us with a closer stop loss.

GBP/USD breaks below crucial support level

GBP/USD has also broken below key support, with the move below $1.3110 bringing a less clear picture for the pair. The lower low that now accompanies Wednesday’s higher high means the market is now in a broadening formation. This lack of direction needs to be resolved to gain confidence going forward.

A break below $1.3087 would provide greater confidence of a bearish shift for the pair, where the next support level comes in at $1.3030. However, until that happens, there is a good chance of a bounce, given the extended nature of a move. 

AUD/USD breaks key support

AUD/USD has broken below a crucial support trendline, clearing out the final major hurdle. With that in mind, it looks likely we will see further downside to come.

As such, look for the continued creation of lower highs and lows. It is preferred to sell into rallies, where the bearish outlook remains in play unless the price breaks above $0.7719.

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