FX snapshot – EUR/USD, GBP/USD, USD/JPY, AUD/USD

Mario Draghi manages to drag EUR/USD lower, with GBP/USD seemingly moving in the opposite direction. Meanwhile, USD/JPY bounces from a crucial support level and AUD/USD is looking at a short-term wedge.

Joshua Mahony
Market Analyst, London

2016-01-22T09:03:00+0000

Source: Bloomberg

Draghi pulls EUR/USD out of bullish pattern

Fundamentals have proven to be the undoing of our short-term EUR/USD outlook for the near-term, with Mr Draghi’s dovish comments leading to a sharp devaluation in the pair.

The move lower was capped at the $1.0781 level, with the subsequent rally bringing us back to square one. However, the key here will be whether this morning’s downturn surpasses yesterday’s low of $1.0781.

Given that we have seen a big fundamentally driven move, I prefer to let the markets settle. However, it is worth noting that the tops have clearly rounded off and there is a good chance that any bounce today would come into resistance lower than $1.0922 for another leg lower.

Resistance levels of note are at $1.0904, $1.0922 and $1.0944, with support at $1.0808 and $1.0781.

EUR/USD

GBP/USD showing signs of strength

GBP/USD appears to be creating a more bullish pattern, with the pair consolidating to form a new higher high overnight.

This $1.4204 support level will be key going forward. As long as price remains above this level, there is likely to be a bounce from here to take back some of the losses we have seen of late.

Resistance levels of note are $1.434, $1.435 and $1.4445. Support levels to watch are $1.4204 and yesterday’s low of $1.4081.

GBP/USD

USD/JPY bounces from crucial 2015 low

The currency pair is rallying back from the absolutely crucial ¥116.21 support level, which forms the major low of 2015.

This is essentially the level which underpins the whole last year of price action, where a close below ¥116.21 would point towards another major selloff. However, for now it seems that this is one step too far and we are seeing a strong move higher through trendline resistance.

This ¥118.06-¥118.38 area forms a very notable zone of resistance and thus a close above ¥118.38 would be needed to signal continued upside for the pair. Otherwise, look out for short-term intraday reversal signals which would point towards a pullback in accordance with the recent moves.

Resistance levels to watch are ¥118.25, ¥118.38 and ¥118.86. Support levels of note are ¥117.43, ¥116.97 and ¥116.51.

USD/JPY

AUD/USD rallying, yet wedge points to pullback

AUD/USD has clearly formed a bottoming pattern this week, with the pair rounding off and now moving towards the upside.

It is worth noting that we saw the same type of thing back on January 12, yet further downside ensued. However, this certainly looks like a more reliable pattern given the time taken to form it.

While the overall picture of the week looks like we could see further gains, the short-term rising wedge we are seeing overnight looks like giving back some of the gains yesterday.

As such, an hourly close back below $0.6985 would point towards a retracement with $0.6963, $0.6938 and $0.6928 the most notable levels that could cap such a move.

Near-term resistance levels of note are $0.7044 and $0.7077.