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

USD/JPY weakness takes a break for now, yet the downtrend seems likely to resume. Conversely, a drift lower for EUR/USD seems likely to result in another leg higher.

GBP/USD currency cross
Source: Bloomberg

EURUSD downside unlikely to last
EUR/USD has been drifting lower overnight, following on from a strong rally off the Wednesday $1.1162 low. This uptrend is clearly defined, yet as we saw on Tuesday, the retracements are often deeper than expected. With that in mind, the selling may not be over quite yet, but as long as price does not close below $1.1162, the bullish outlook remains intact.

Typically, the bottoms have seen long lower shadows as witnessed on the Monday and Wednesday lows. We have not seen that yet, and the depth of the previous pullbacks make it likely we could see a stronger move lower before pushing higher.

A closed hourly candle above $1.1338 would provide a signal that the buying looks set to resume, with $1.1376 the next major resistance level. However, without that break through $1.1338, a deeper retracement seems likely, with $1.1252 and $1.1162 the next important support levels. 

GBP/USD choppiness resumes
The choppy unpredictability in GBP/USD means this is a difficult pair to trade of late. Looking at it from a longer-term perspective, it seems as though we could have bottomed out for now following a big selloff in January.

With that in mind, the push through $1.4500 this morning looks like a signal that a push towards $1.4566 could be around the corner. Thus we hold a bullish tentative view for a move back towards $1.4566 and possibly $1.4668. A closed candle below $1.1.4458 would negate this view. 

USD/JPY clawing back losses
USD/JPY is attempting to regain some of the ground lost is the recent rout. This is going to be a hard sell for many, with the sell-off so entrenched.

Of course, markets do not move in a straight line and thus we could see some form of retracement higher, with a move back up above Y113.00 an important bullish signal for the short-term. However, it is always difficult to countertrade such a strong move given that another leg lower could be just around the corner.

As such, it is more likely that many will see this move higher as a means to go short at a better price. Key resistance levels are Y113.00, Y113.20, Y114.25 and Y115.26. Notable support levels are at Y111.66 and Y110.99.

USD/CAD in rising wedge
USD/CAD is trading within a bearish rising wedge pattern, following a yesterday’s selling from the crucial C$1.4000 resistance level. The 50-period simple moving average (4-hour) is providing support alongside the wedge trendline, so we could see another bounce within the pattern.

However, given the wedge is bearish in nature, coupled with the importance of C$1.4000 as a resistance levels, it seems likely the exit of this pattern will be to the downside. The bearish signal would be a closed hourly candle below C$1.3816 which would then point towards C$1.3639 as the next support level. 

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