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

Yesterday’s FOMC statement sends the dollar downwards, sparking rallies for GBP/USD and EUR/USD, while USD/JPY sold off. However, there is reason to believe these moves could be in the process of turning around.

US dollar and Japanese yen
Source: Bloomberg

EUR/USD rallies out of downtrend
Yesterday’s FOMC statement sent EUR/USD flying, with the pair gaining heavily overnight. Crucially, we have seen price break into the 76.4% retracement of a wider move and as such, there is a strong chance we will see the pair begin to weaken from here.

Ultimately, it is a case of trying to pick through the different timeframe moves and while key resistance levels have been broken on the intraday markets, the key swing highs of $1.1186 and $1.1165 remain in a pattern of lower highs. As such, a bearish view is in place unless we see a break through $1.1165.

GBP/USD finds support on previous resistance
IN_GBPUSD has broken through the $1.3165 resistance level, with price coming back for a retest this morning. That points towards the potential for further gains, with $1.3250 the next important resistance level.

Crucially, we would need to see a push through $1.3289 to negate the wider descending triangle pattern in play. As such, while it looks like we could see further upside in the short-term, the $1.3238 level represents an interesting area for shorts based on the notion that we will return to the bottom of this triangle rather than break through $1.3289 resistance.

USD/JPY weakness could come to a halt
Yesterday’s bearish IN_USDJPY view played out well, with the FOMC statement providing a sharp depreciation in the pair. However, we have since seen a move back into the 76.4% retracement, with a bullish descending wedge pattern coming close to conclusion.

With the Bank of Japan up ahead, it is likely that USD/JPY shorts could be trimmed in anticipation of easing. With that in mind, there is a good chance we could see this sell-off come under pressure, where an hourly close above ¥105.07 provides a clue that this weakness is over, given the completion of the wedge pattern.

Until that happens, there is still a chance of further downside in accordance with the weakness evident over the past week.

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