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

The counter Brexit move appears to be slowing, with GBP/USD and USD/JPY in particular trading largely flat. With that in mind, it makes sense to expect a return to trend before long.

Dollar and pound
Source: Bloomberg

EUR/USD retracement continues, for now

EUR/USD has been gaining ground over the past week, following on from the Brexit-fueled sell-off. So far we have retraced 50% of that downturn, with price pulling back from that Fibonacci level. From a wider perspective, this rally is likely to have limited legs on it and as such another leg lower seems likely before long.

With that in mind, a short-term bullish view remains in play, yet be on the lookout for bearish reversal signs. The next resistance levels of note are $1.1170, $1.1231 and $1.1306. An hourly close below $1.1072 would provide a bearish signal in line with the wider trend.

GBP/USD continues to consolidate

IN_GBPUSD remains within the very tight range that has been in place since Thursday evening, with a significant degree of hesitancy evident following such a strong deterioration post-Brexit. Given the wider sell-off, coupled with the short-term weakness leading into this current range, it seems most likely that we will see further losses following the breakout.

As such, a bearish view remains in play, especially around the $1.3349 area. This bearish bias holds unless we see an hourly close above 1$.3504. Key support levels of note are $1.3206 and $1.3121.

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USD/JPY range could spark downturn

IN_USDJPY is back into the ¥102.36-¥103.02 range that dominated Thursday’s price action last week. There are two ways to look at the current situation. Firstly, we have not created a new low and are simply seeing a deeper retracement of Thursday’s rally. As such, a bullish view remains in place.

However, it is also possible that we are simply back into a lower range, which could create a second shoulder. Ultimately the key here will be whether we see a significant break and closed candle below ¥102.36. Should that occur, we could swiftly return to the ¥101.40 levels. However, until that happens, it makes sense to remain bullish for the short-term.

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