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

Dollar strength is in focus, with EUR/USD and GBP/USD looking for further downside while USD/JPY shows signs of a potential medium-term reversal.

Dollar and yen notes
Source: Bloomberg

EUR/USD begins to turn lower once more

EUR/USD turned lower yesterday, following on from a rally into trendline resistance earlier in the week. That said, the one key hurdle to get past for a continuation of the sell-off would come at $1.1189, which now forms a double top pattern.

As such, while a bearish outlook remains, any new positions would make sense upon seeing an hourly close below $1.1189 to lessen the potential for another bounce. We would need to see an hourly close above $1.1239 to negate this bearish view.

GBP/USD posts swing high following bounce

Yesterday saw IN_GBPUSD gain ground somewhat and while this may be a countertrend move, it is a useful one as it finally provides us with a key swing high to utilise. As such, an hourly close below $1.2685 would provide a bearish continuation signal, while an hourly close above $1.2771 would point towards a more protracted bounce in the pair.

The fact that we have broken to new 31-year lows and into relatively clear air, a continuation of the downtrend is the favoured outcome.

USD/JPY showing signs of potential trend change

IN_USDJPY is breaking higher once more, with the pair having experienced a particularly strong period in October so far. Crucially, we have broken through a 10-month trendline resistance, which could highlight a potential bullish trend change for the pair.

The key event that would point to a wider and longer-term reversal would be a closed daily candle above ¥104.32. However, for the short-term we have a clear uptrend in place which is showing little signs of letting up. Overnight support has come at the important mid-September high of ¥103.35 and for this short-term rally to be negated, we would need to see an hourly close below that level.

Until that occurs, further gains are likely, where a break above ¥104.32 would be the key to further upside.

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