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

The US dollar is coming under pressure as GBP/USD and EUR/USD show the potential for a bullish bounce. Meanwhile, the weakness in USD/JPY is firmly established and looking to push further to the downside.

Pound and dollar
Source: Bloomberg

Is EUR/USD turning a corner?

EUR/USD broke higher in a convincing manner yesterday, with the pair subsequently selling off from the crucial swing high of $1.1220. It is important to note that we have now set a small higher low and a marginal higher high. This points towards the potential for a shift in sentiment to the upside.

It is worth noting that the medium-term picture for the pair has clearly shifted towards a bearish view and thus any period of upside in the coming days or weeks would be seen as a retracement of the May sell-off. For the near-term, the ability to break back above $1.1220 would add significant weight to the notion that we could be seeing a bottom in play, with $1.1345 the next major resistance level.

However, with the price currently consolidating, there is clear hesitancy ahead of the non-farm payrolls figures. Areas of particular interest to the downside are the 76.4% retracement ($1.1139) and the swing low of $1.1114, which if taken out would negate the view that we could be seeing a bottom.

GBP/USD sell-off passes key Fibonacci level

GBP/USD has seen a pretty shocking week, as recent polls have portrayed a very different picture of the EU referendum than that seen last week. It is worth noting that on the short-term, things do look bleak, with the pair having broken through the $1.4587 and $1.4442 support levels. However, until we see a closed candle below $1.4333, a bullish resurgence is expected to come into play.

For this to look plausible, we would need to see an hourly close above $1.4473, which would negate the creation of lower highs and lows while also forming a double-bottom pattern.

USD/JPY recovery unlikely to last

USD/JPY saw yet another sharp move lower overnight, with the pair fleetingly moving to a new three-week low. We are now seeing the pair move higher, in what looks like a retracement of this overnight sell-off.

With that in mind, a bearish view is held unless we see an hourly close above ¥109.13. Retracements to 61.8% (¥108.89) and 76.4% (¥108.99) are of particular interest to push the pair lower once more. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.