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

Federal Reserve minutes weakened the US dollar, providing a short-term respite for key risk currencies.

Pound coins and dollar notes
Source: Bloomberg

All eyes will be on the $1.28 level, yesterday’s low, to see if the downward pressure continues. Doubtless some will think that there is some upward movement coming, although the cautious will wait for a close above $1.30.

The pair continues to hover in oversold territory, with a bounce suggesting a move to $1.35 or $1.36. A break below $1.28 would still leave this cross in the support-light zone between the current level and the 1985 lows. 

Dovish Fed minutes have given the currency a breathing space, although EUR/USD remains stuck below the 200-day simple moving average ($1.1096). A push below yesterday’s low around $1.1025 would suggest we see a further drop towards the post-Brexit lows towards $1.09.

A bounce would need to clear $1.1150, where gains stalled at the end of June (also the 16 June low), and then on to $1.12 and then $1.1350.

Despite the recovery in AUD/USD yesterday, the pair proved unable to push on above the 4 July high just below $0.7550. If momentum stalls here then we could see a test of yesterday’s low near $0.74, with a close below here opening the way to potential support at $0.73.

A bounce must clear $0.7550 and would then head towards the 23 June peak towards $0.7650.

It looks very much like the next downward move in the 2016 dollar-yen downtrend is beginning, with Fed minutes providing the fundamental catalyst. The bounce took the pair away from ¥100, but a close below here would take the pair on towards ¥99.

A bounce needs to clear ¥101.80 in the first instance, and then on towards the 30 June peak around ¥103.40, although we would continue to expect further downside here. 

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