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

FX markets show significant hesitancy ahead of tomorrow’s vote, with the EUR/USD and GBP/USD rally coming under pressure as USD/JPY consolidates.

US dollar and Japanese yen
Source: Bloomberg

EUR/USD reversing higher following Draghi sell-off

Mario Draghi practiced his favourite party trick yesterday, once more talking down the euro with reference to further easing. Interestingly, we did not see the $1.1223 level taken out to create a new low and have posted some long legged bullish reversal candles.

With the stochastic oscillator turning in a bullish manner, a rally seems the likeliest option from here, with a significant amount of ground to be made up. Essentially, EUR/USD strength is a Bremain play, which appears to be the trend of recent polls. The bullish view would be negated with an hourly close below $1.1223. Key resistance levels to watch are $1.1300, $1.1350 and $1.1382.

GBP/USD asking questions around key resistance area

IN_GBPUSD managed to rally out of a sharp sell-off yesterday, with the 76.4% pullback being hit on the way down. However, despite this, it is worth being hesitant around current levels, with a crucial resistance zone up ahead.

The $1.4739-$1.4784 resistance area should provide us with a lead for the day, with a break through this zone required to resume this uptrend. Alternately, a break back below $1.4631 would negate this rally, providing a more bearish outlook.

USD/JPY looks to continue rangebound trading

It is clear that sentiment is on a knife-edge as we approach tomorrow’s referendum, with IN_USDJPY largely consolidating over the past week. The clear range (¥103.55-¥104.84) looks likely to continue for now, with further downside to come, as triggered by a closed hourly candle below ¥104.35.

This would create a head and shoulders pattern which if confirmed would provide a target of ¥103.65. The bearish view would be negated with a rally through the top of this range, where a closed candle will be of crucial importance (as highlighted yesterday).

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