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

The dollar comes under pressure, with GBP/USD and EUR/USD both regaining recently lost ground. However, with downtrends still intact, the dollar strength story looks likely to return soon enough, helping USD/JPY out of a ten-month downtrend.

Euro and dollar notes
Source: Bloomberg

EUR/USD builds base for retracement

EUR/USD is staging a bit of a fightback, with a rounded base bottom formed. This comes off the back of a substantial sell-off, which was always likely to see some sort of countertrend rally soon enough.

Price has rallied into the $1.0911 resistance level (June low), which will be crucial for the next move. An hourly close above there would provide us with a deeper retracement, where Fibonacci resistance levels at $1.0945, $1.0968 and $1.0995 come into play.

We would need to see an hourly close above $1.1040 to provide a clue that we are in fact retracing the wider move from $1.1275. Conversely, a break back below $1.0874 would signal the sell-off could be back on the cards.

GBP/USD sell-off proves fleeting

IN_GBPUSD sold off sharply yesterday, only to regain much of the ground soon after. This goes to show how difficult it is trading a market which is always on the cusp of an unpredictable central bank of government comment.

For now we are seeing the price attempt to break higher following a higher low this morning. As such, an hourly close above $1.2206 would provide a bullish signal.

However, with the court decision looming over whether the government can enact Article 50 without a vote in parliament, this is a pair where you should tread carefully.

Is USD/JPY about to break higher?

IN_USDJPY has sold off into trendline support this morning, with the pair testing levels above ¥104.32. That level represents a major turning point in the market should price break higher and could set us up for a protracted period of gains.

For now, we seem to be channeling higher and, as such, further gains seem likely unless we post an hourly close below ¥103.52. However, with price so close to breaking out of this ten-month downtrend, we could see some choppiness around this level for a bit.

If we do finally break higher from here, it could provide some great directional volatility. 

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