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

As we approach the ECB’s latest rate decision, European currencies have proved surprisingly resilient. However, with the threat of Mario Draghi's jawboning, will EUR/USD turn lower once more? Meanwhile, AUD/USD threatens to break out from a multi-year triangle formation.

Euro note
Source: Bloomberg

EUR/USD consolidates after rally

EUR/USD continues to trade within a gradually ascending channel, coming off the back of a substantial rally on Tuesday. This whole move higher seems like a retracement of the late August deterioration and as such, a move into $1.1309 would be an interesting proposition before looking for shorts once more.

For now, we have the European Central Bank ahead of us, which typically means euro weakness, As such, a rally into the top of this channel would make sense to short rather than chase, with markets likely to gradually price in a potential jawboning from Mr Draghi this afternoon. 

GBP/USD pulls back to Fibonacci support

Yesterday saw a sharp deterioration, with price falling into the 76.4% Fibonacci retracement at $1.3325. Given the fact we have seen price surpass the 1.3372 resistance level, there is certainly a good chance we will see further upside.

Bearing in mind the deep retracement we are currently seeing, it makes sense to look for a rally from here, providing a strong risk-to-reward ratio. A move back below $1.3288 providing the signal that we will break lower once more instead.

AUD/USD rallies through key resistance level

AUD/USD has seen a substantial period of strength since reversing higher from the 76.4% retracement ($0.7500) late last month. Crucially we have seen the pair rally through an important resistance level at $0.7692, which represents a key swing high from August. Importantly, it is also the region of the 76.4% pullback of the August high to low.

Given the break through both of these levels, there is a strong likeliness we will continue to trade higher from here. Should we eventually break through $0.7758, then this would represent a bullish triangle breakout confirmation, thus setting up a longer-term bullish outlook.

As such, for now it makes sense to buy on rallies, yet many will instead focus on the bigger picture and await a potential break through $0.7758.

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