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

Following a big rally in the dollar, can the euro and pound regain ground lost after Friday’s US GDP reading?

Source: Bloomberg

Will EUR/USD bounce last?
Friday saw the EUR/USD pair sell-off heavily owing to a pretty impressive US GDP release. Unfortunately this negated an interesting bullish reversal in the offing. Nevertheless, with price now having broken through both the $1.0986 and $1.0967 support levels, the bulls are at bay once more. This morning has seen a small intraday double-bottom pattern, with a break of the neckline leading to a move up to the initial $1.0957.

Ultimately, the ability to see further gains will be established by finding a new base above Friday’s lows of $1.0911. However, coming off the back of such a strong sell-off, there is a good chance we could see another leg lower, which would be signaled by a closed candle below $1.0911.

Key support levels are $1.0911 and $1.0808. Key resistance levels are $1.0957, $1.0986 and $1.1016. Be aware that the eurozone CPI reading this morning could have a profound effect upon this pair.

GBP/USD in countertrend rally
GBP/USD also sold off heavily on Friday, compounding the consistent downtrend that has been in play of late. Overnight consolidation respected Friday’s lows as new found resistance, yet with the recent break through this level, we could see some sort of short-term resurgence for the pair.

Much like EUR/USD, the ability to see any form of bullish outlook would be dependent upon the creation of a new higher low, with the $1.3878 level the most likely source of support. However, we remain bearish and thus view any upside as a likely source of selling. Therefore we prefer selling into rallies unless we get a move back above $1.4042.

A closed candle below the overnight lows of $1.3841 would signal another leg lower for the pair. Support levels of note are $1.3878, $1.3841 and $1.3682. Resistance levels to watch are at $1.4042, $1.4063 and $1.4080.

USD/JPY bulls expected to return
USD/JPY broke higher on Friday, following on from the dollar’s strength across the board. However, with a period of downside this morning, there is a chance we could see the bulls come back into play.

Thus a bullish outlook exists unless we see a closed candle below the ¥112.56 support level. Support levels of note are ¥112.54, ¥112.30 and ¥111.66. Resistance levels in view are ¥113.20, ¥113.37 and ¥114.01.

USD/CAD continues rangebound trade

USD/CAD remains stuck within a sideways, rangebound trend. Price managed to marginally create new highs and lows in the middle of Friday’s session, bringing the potential for a diamond bottom pattern.

However, ultimately we will take our lead from a closed candle either above C$1.3564 (bullish) or below C$1.3505 (bearish). Given the downtrend coming into this pattern, our preference is for further selling.

The key near-term resistance levels are C$1.3550, C$1.3564, C$1.3639 and C$1.3653. To the downside, support levels to watch are C$1.3505 and C$1.3457.

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