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

The dollar gains ground after a breakthrough for tax cut prospects. However, with EUR/USD, GBP/USD and USD/JPY facing key hurdles, the stage is not yet set for a breakout.

Dollar and yen
Source: Bloomberg

EUR/USD turns lower from SMA resistance

EUR/USD has begun weakening from the 200-period (4-hour) simple moving average (SMA), which has been a highly reliable indicator over recent weeks. Coming off the back of a retracement and rebound, there is still a good chance we could move higher from here.

However, the key here is whether we see another break through yesterday’s high and the 200-SMA to signal a continuation of the recent rebound. To the downside, the risk is that we break below $1.1662 to form a wider head and shoulders formation.

GBP/USD turning back towards key support zone

GBP/USD has been selling-off throughout the week, with trendline support coming into view once more. The low of $1.3030, coupled with the ascending trendline, points towards a crucial area where this market could rebound once more.

With the break below $1.3121, it looks likely that we will see further downside. Yet, look out for how the market reacts to that trendline and horizontal support zone, as a gauge of whether the market is due to bounce or continue lower. Conversely, a move through $1.3228 would signal that this downturn is over.

USD/JPY breaking higher once more

USD/JPY is continuing to move higher following the bullish breakout seen over the past few days. The push through ¥113.15 is a significant step towards a bullish breakout, with the ¥113.44 needing to be broken for the market to embark on another bullish breakout.

Should that occur, the ultimate aim would be to push through ¥114.37 to establish a wider bullish outlook. To the downside, we would need to see the price fall below ¥112.29 to negate this bullish view.

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