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

EUR/USD and GBP/USD continue to rebound, with both breaking higher from a triangle formation. However, with the overall downtrend remaining intact, the sell-off may not be over yet.

Euro and dollar notes
Source: Bloomberg

EUR/USD breaking out from triangle formation

EUR/USD is in the process of breaking higher from a triangle formation this morning, with price passing through a descending trendline that has been formed over the past three trading days.

While this is a bullish signal, the key is to break through the first swing higher, with an hourly close above $1.1091 providing a bullish short-term signal.

Subsequent resistance levels in view are $1.1111, $1.1131 and $1.1180. Alternately, a closed hourly candle below $1.1049 would provide a bearish outlook for a move towards the next support levels around $1.0971 and $1.0911.

GBP/USD pushes through resistance

IN_GBPUSD is similarly breaking higher from a triangle formation this morning, with an hourly close above the $1.3372 level looking to be on the cards.

This would be a bullish signal should it occur, yet it is worthwhile noting the wider picture, with price having failed to break through $1.3475 yesterday. Thus for us to see a strong move, it is more important to see an hourly close above $1.3419 and after that $1.3475.

Of course, these three levels would be taken one at a time, and the fact we are seeing the first taken out provides a greater likeliness that the others will too.

However, Be aware that despite this seemingly bullish breakout, while we remain below $1.3475, this still looks like it could be a bearish retracement rather than a bottom.

USD/JPY weakens overnight

The yen has come back into favour overnight, as the pair retraced 50% of yesterday’s rally. Interestingly, yesterday’s top came at a 76.4% retracement of Friday’s resurgent bounce and subsequent low.

As such, while we are seeing some strength, it seems likely we will see the sellers come back in soon enough, with a break and closed candle above ¥103.25 required to truly paint a more bullish picture. Conversely, an hourly close below ¥101.56 would be required to reinstate the bearish view.

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