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

Dollar strength finally returns, confirming the view that was held all last week. With EUR/USD, GBP/USD and AUD/USD all heading lower, it seems we have seen a trend change over the short-term.

Dollar and euro notes
Source: Bloomberg

EUR/USD downtrend expected to continue
The bearish EUR/USD outlook last week finally bore fruits, after hawkish comments from Fischer and Yellen sent the pair back downwards in a continuation of the trend in place since May.

This is expected to continue, with the creation of lower highs and lower lows crucial. As such, further downside is expected, with price expected to surpass $1.1158 to create a new low. The widening of price action provides us with greater confidence of a continuation lower, given that a tightening wedge pattern would indicate a reversal.

While both the medium and short-term outlook point towards further downside, an hourly close above $1.1193 would provide expectation of a rally to retrace some of Friday’s sell-off. Until that happens, another leg lower looks on the cards.

GBP/USD sell-off set in motion
IN_GBPUSD looks to be back on the downtrend following Friday’s sharp move lower, which followed a move into 76.4% resistance at $1.3252. We are now looking for an extension of that, where an hourly close below $1.3059 could provide further downside today.

However, much like the move overnight, it is well worth watching out for any countertrend pullbacks for a more advantageous area to get into the trend. The bearish outlook remains in place unless we see an hourly close above $1.3120. 

AUD/USD expected to tumble once more
AUD/USD has been sent lower since topping out in recent weeks, putting the pair on a bearish pathway once more. The retracement towards recent support at $0.7583 appears to be over, and a move back down below $0.7525 is now expected. With that in mind, a bearish view is in place unless we see an hourly close above $0.7583. 

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