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

EUR/USD is showing signs of strength, while GBP/USD continues to flounder despite yesterday’s short-term strength. Meanwhile, could USD/CAD provide us with a short-term trade that converts into a longer term picture?

US dollar and pound coins
Source: Bloomberg

EUR/USD not quite down and out

EUR/USD managed to break through to a marginal new intraday high on Monday night, which provides us with a sign that we could see this pair rise once more.

The key here is whether we remain above $1.0510, where an hourly close below that level would provide a more bearish outlook. However, for now there is a good chance of a move higher following a fall into the 76.4% retracement at $1.0538.

GBP/USD pulling back from key resistance

GBP/USD is moving lower from the $1.2200 resistance level (3 January low) this morning. The recent sell-off has been dramatic, yet there is likely to be more in the tank for the coming months.

With that in mind, the fall out of a wedge pattern could provide us with the next leg lower. For greater confidence for another strong move, we would need to see an hourly close below $1.2107. However, for now further short-term losses seem likely.

USD/CAD triangle could provide base

USD/CAD is trading within a symmetrical triangle formation this week, following a fall into the 76.4% retracement at C$1.3203. Given the wider long-term eight-month ascending channel, there is a good chance we could be using this triangle as a basing pattern, where a break through C$1.3257 and C$1.3277 would provide confidence of a significant move higher.

Given the shallow nature of the lower bound of this triangle, any pullback towards the trendline could provide the opportunity for longs around the short-term 76.4% (C$1.3203) retracement which would provide a short-term 3/1 trade for a move back into C$1.3239. Given the expectation of a break higher, that 3/1 could easily be amplified if looking at the bigger picture.

Ultimately it depends on someone’s outlook of whether we are seeing a base/reversal or a continuation pattern as to how to play it. Bulls would want to be long from the C$1.3200 region, while shorts will be looking around the C$1.3239 region. Given the long-term considerations, there is a good chance we could see a break higher, yet until we see a break above C$1.3277 or below C$1.3192, it is purely conjecture.

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