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

After initial sharp moves lower for GBP/USD and EUR/USD yesterday, the dollar soon lost out across the board. Will we see early dollar gains hold or falter once more?

EUR/USD currency pair
Source: Bloomberg

EUR/USD rallies despite radical ECB easing
Mario Draghi must be waking up wondering what he has to do to devalue the euro, with EUR/USD breaking higher despite initial losses. Interestingly, those initial losses didn’t break through $1.0808 support, yet the resulting bounce broke $1.1059 resistance – certainly a bullish move.

We are seeing the pair pullback this morning and are therefore looking for a support to instigate further gains. The obvious area of support would be the zone between the 38.2% retracement of $1.1067 and the key previous resistance of $1.1059.

As such, while the short-term looks like we could see an extension of this pullback, another move back towards $1.1218 seems likely before long.

GBP/USD breaks to new high
GBP/USD also rallied despite early weakness upon the European Central Bank (ECB) release yesterday. This means we now have a more convoluted picture, with higher highs and lower lows.

However, given the recent uptrend and gradual retracement this morning, another leg higher seems likely. As such, a closed hourly candle above $1.4291 would provide a renewed bullish short-term view for the pair with initial resistance at yesterday’s highs of $1.4317. Key initial support is likely around $1.4230.

USD/JPY ranging after Fibonacci response
USD/JPY has been trading between ¥112.18 (61.8% Fibonacci retracement) and ¥114.55 over the past two weeks. Yesterday saw the pair rally heavily at first, only to sell-off once more. Ultimately, it seems worthwhile waiting for a break out of this range before we gain any solid direction.

Thus we will be looking for bearish intraday reversal signals with any price action in the ¥114.25-114.55 zone. Conversely, bullish reversal signs around ¥112.18 should be noted. A breakout would be signaled with a closed hourly candle above ¥114.55 or below ¥112.18.

USD/CAD sells off from SMA once more
Wednesday’s move below C$1.3262 pointed towards a continuation of the downtrend that has been in play over recent weeks. On both Wednesday and Thursday, we saw the 50-period simple moving average (four-hour) provide crucial resistance to send the pair lower.

We are currently seeing the pair respond to the C$1.3262 support level. Given the fact this sell-off has already significantly progressed, the risk/reward profile of any shorts do not seem worthwhile. Thus while a bearish view is in play, it makes more sense to short into rallies, with the 50-period in particular marking a notable resistance point.

A break through C$1.4357 would negate this bearish view. Key support levels in the meanwhile are C$1.3262, C$1.3228 and C$1.3121.

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