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

Dollar weakness drives substantial gains for the euro, sterling and yen overnight. However, with clearly defined trends in play, are we set to see a like-for-like reversal of these overnight moves?

Joshua Mahony
Market Analyst, London

2016-08-10T09:05:45+0100

Source: Bloomberg

Will EUR/USD break crucial resistance level?
EUR/USD saw substantial gains yesterday, after breaking out of a consolidation period. Interestingly, we have seen a trend of lower highs and lower lows on the wider perspective, with the break below $1.1154 and $1.1071 particularly notable.

For this to be negated, we would need to see a break through the $1.1162 level, thus sparking a new higher high. Given the recent wedge breakout on the stochastic, there is a good chance we could see this market move lower.

As such, unless we see an hourly close above $1.1162, a bearish outlook is preferred, if only to retrace some of yesterday’s substantial gains.

EUR/USD daily chart

GBP/USD expected to pull back once more
A similar story for IN_GBPUSD, which is pulling back following a failure to break through the $1.3098 mark. Essentially, we would need to see such a move for the downtrend to be negated. Until that happens, a bearish view remains in place, with a move back down to $1.2954 expected.

GBP/USD chart

Will USD/JPY weakness turn bullish once more?
IN_USDJPY has sold-off sharply overnight, bringing price back to a crucial trendline support. With the stochastic now oversold and the past two candles posting long lower shadows into the 76.4% Fibonacci retracement, there is a good chance we will see the pair start to strengthen once more.

From a wider perspective, the fleeting push above ¥106.84 raised questions over whether this 8-month downtrend was over. As such, there is a good chance that we will see the creation of a new higher high above ¥107.47 rather than a continuation of the downtrend.