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

The dollar strength story has come under some pressure, as we move towards the US jobs report tomorrow. However, this countertrend move is unlikely to last and thus provides us with opportune areas to get into the trend.

Euro coin and pound sterling note
Source: Bloomberg

EUR/USD threatens a short-term bounce

Yesterday saw EUR/USD break marginally higher than the key $1.1162 swing high, thus negating the recent creation of lower highs. This is not a worry for the longer-term outlook, which remains bearish irrespective of whether we see a period of upside or not.

However, for the near-term we need to see either a push back below $1.1122 to continue the recent downtrend, or a break through $1.1166 to point towards further short-term gains. Interestingly, such countertrend reversals often see deep retracements and therefore it makes sense to keep an eye out for whether we see any response to the 76.4% pullback ($1.1133).

For now, the downtrend remains intact, yet those without a position may want confirmation of a trend continuation first. 

GBP/USD consolidates following break higher

IN_GBPUSD broke through the crucial $1.3120 resistance level yesterday, providing evidence we were going to see a deeper retracement of Friday’s Fed-fueled sell-off. With price currently in a symmetrical triangle, we await a breakout for directional bias. Given the rally into this pattern, another leg higher seems likely.

However, instead it makes sense to look out for an hourly close above the $1.3158 or below $1.3128 as a breakout signal. The medium-term bearish outlook remains and as such, any upside will be seen as an opportunity to get short at a better price. 

AUD/USD rally unlikely to last

AUD/USD has bounced from trendline support yesterday, which is accompanied by a wider 76.4% retracement. For bulls that would have been seen as an opportune area to get long. However, this current rally looks unlikely to last, where we would need to see a break through $0.7581 to negate the recent downtrend.

With that in mind, shorts around $0.7560 would be preferred should we reach it. Near-term trendline, simple moving average (50-hour) and horizontal support at $0.7525 could provide the next leg higher. However, whether that happens or not, a bearish outlook is in place unless we see an hourly close above $0.7581. 

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