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

The dollar seems to be gaining ground this morning, sending EUR/USD, GBP/USD and AUD/USD lower. Have we finally seen a reversal for the US dollar?

Dollar and pound coins
Source: Bloomberg

EUR/USD weakens from Fibonacci resistance

EUR/USD has once more come into a deep retracement, with yesterday’s relatively hawkish European Central Bank meeting providing a significant bounce for the pair. This saw price break through the 76.4% retracement ($1.1309) before weakening late into the session. We have a potential head and shoulders pattern with a slanted neckline coming in play here. Thus should price reverse lower and post an hourly close below the ascending trendline, a bearish outlook comes into play.

However, the key would be an hourly close below $1.1241 to provide us with a bearish outlook. Given that we have seen higher highs and higher lows over the past week, there is clearly a possibility the pair could continue this short-term uptrend to break through yesterday’s high of $1.1327.

However, given the similarity of yesterday’s long wicked top to the previous swing high reversals, it makes more sense to play a potential reversal (below $1.1241) or await a break above $1.1341.

GBP/USD turning lower following head and shoulders

Yesterday saw IN_GBPUSD break below a head and shoulders ascending neckline, with price subsequently falling below the key $1.3319 mark to provide a bearish short-term view. We are seeing that come back into play this morning despite a retracement higher.

Whether this retracement is over or not remains to be seen, but as long as price does not post an hourly close above $1.3375, a bearish view is in place. The next key support levels to watch are $1.3283 and $1.3252.

AUD/USD selling off sharply

AUD/USD has turned lower in a convincing manner, coming off the back of a rally into $0.7723 resistance. The push back below $0.7651 is highly notable and points towards a potential period of weakness. Given that yesterday’s peak came into a major multi-year trendline resistance, there is a good chance we will start to see the market turn lower from here.

However, with price having dropped into a descending trendline, there is the potential for a bounce in the short-term. That being said, as long as we do not see the creation of a new higher high, a bearish short-term view is in play. Thus as long as price remains below $0.7657, we will be looking for further downside.

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