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

Mixed fortunes for the dollar ahead of the FOMC meeting, with EUR/USD weakness, GBP/USD strength, and the possibility of a USD/JPY bearish reversal.

Yen and dollar
Source: Bloomberg

EUR/USD turning lower from head and shoulders neckline

EUR/USD has been consolidating below the crucial $1.1662-1.1669 resistance zone this week. That represents the neckline of a three-month head and shoulders formation. Given the importance of that resistance level, the fact that we are beginning to move lower is certainly significant.

An hourly close above resistance points towards further upside. However, until then there is a good chance of a bearish move from here, with an hourly close below $1.1625 providing a strong bearish signal. 

GBP/USD breaks through key resistance level

GBP/USD has managed to break through the $1.3292 resistance level overnight, bringing a signal that the short-term upside is likely to continue apace.

With that in mind, any downside would be perceived as a buying opportunity leading into the Bank of England (BoE) meeting tomorrow. We would need to break back below $1.3267 to negate this bullish outlook. 

USD/JPY rallies into Fibonacci resistance

USD/JPY has been regaining ground overnight, following a break below near-term support of ¥113.34. Whilst that pullback looks like a possible retracement of the ¥111.65-114.45 rally, there is a good chance we could see another move lower, to surpass the 50% retracement seen so far.

That points towards a possible turn lower from the current levels. Look out for the 70-76.4% retracement region (¥114.00-114.10) for possible shorts, with a break through ¥114.45 required to negate this bearish idea. The fact that ¥114.45 is a major long-term resistance level, provides us with a greater possibility that the market will turn lower once more. 

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