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

FX markets have seen plenty of volatility in the past day, with the 2016 downtrend in USD/JPY still going strong. A surge in the euro versus the dollar makes life interesting too, ahead of the ECB meeting tomorrow.

Japanese yen and US dollar notes
Source: Bloomberg

GBP/USD set for fresh volatility?

Sterling strength has been the order of things for the past week now, helped along by fundamental news flow. Today’s appearance by Mark Carney and Co in front of the Treasury Select Committee could provide fresh volatility, especially if the governor sounds a little more hawkish (or, perhaps more accurately, a bit less dovish).

Dips in cable have been firmly bought, so we should be looking out for any today. The upward limit of cable’s advances has been marked by $1.35-$1.3550 since the Brexit vote, so this is the first area of resistance to watch for. Support is possible around $1.333, the lows of 5-6 September, while below this is $1.3250. 

EUR/USD fights back

Yesterday’s shock US non-manufacturing PMI dealt the dollar another serious blow, which has put new fight into EUR/USD. Indeed, the pair surged around 100 points in the second-half of yesterday, running into resistance at $1.1260.

It looks like the steep downtrend of the second-half of August has run its course, so while the pair looks overextended on an hourly chart, any weakness could bring out fresh buyers (with the caveat that the European Central Bank meeting tomorrow could change things rapidly). 

USD/JPY reversal reasserted

There has been quite the reversal here over the past 24 hours, as the downtrend of the year reasserts itself with impressive force. Before the US ISM report yesterday the pair traded at ¥103.50 and now we find ourselves 200 points lower.

Now sharply oversold, we could see a bounce here, for the time being, but strength is likely to be sold as the market reassesses the monetary policy outlook at both the Federal Reserve and the Bank of Japan. The obvious downside target remains ¥100, but this trend needs to push below here to establish a new lower low to ensure this long-running move extends into the final months of 2016. 

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