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

The dollar starts to come under pressure, as GBP/USD and EUR/USD begin to turn higher. Meanwhile, could we see USD/JPY's uptrend come under pressure at a crucial resistance level?

US dollar and euro notes
Source: Bloomberg

EUR/USD shows signs of resurgence

EUR/USD managed to break through the key $1.0629 resistance level yesterday, with price subsequently consolidating. Given the current move back below that level, it seems we are set upon a deeper retracement of yesterday’s rally.

However, given the creation of a new higher high above $1.0629, coupled with the fact this bounce is occurring from the crucial $1.0525 support level (December 2015 low), a bullish short-term view is in play. Given the break back below $1.0629, it looks as though a deep retracement of 70% or 76.4% could be on the cards. Should that occur, it could present a strong bullish case.

The difficulty though would be determining whether to look for a retracement of the rally from $1.0591 or $1.0526. In either case, it seems likely any selling pressure could be fleeting.

GBP/USD breaking higher from wedge

GBP/USD has been breaking higher since yesterday’s open, with price punching through the top of its falling wedge pattern. That wedge is a bullish pattern and thus the current move is not a complete surprise. Bearing in mind the wider trend, there is the basis for another strong move higher in the pair.

However, to gain confidence of this resurgence, an hourly close above $1.2704 would be required. Conversely, a break below $1.2549 would negate this bullish view.

USD/JPY trading below key resistance level

USD/JPY pulled back from the crucial ¥116.21 resistance level yesterday, with price retracing to ¥114.83 support. The head and shoulders neckline at ¥116.21 which once broken, led to a four-month sell-off earlier this year.

As such, the ability to break and post a four-hour close above ¥116.21 is key to the uptrend continuing. Conversely, an hourly close below ¥113.13 would provide a bearish view.

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