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

The dollar rally takes a breather, but are we set for another sharp move higher for the greenback?

Pound and dollar
Source: Bloomberg

EUR/USD retraces up to key resistance

EUR/USD has been selling off sharply throughout the week, with price crucially falling and closing below the critical $1.0462 level. This not only represented the low of March 2015, but also underpinned almost two years of consolidation.

With price moving back into this critical level, there is a chance we could see another strong move lower for the pair. An hourly close back above $1.0525 would negate this bearish view.

GBP/USD consolidating after sell-off

GBP/USD has been lacking direction overnight, as the pair consolidates in the wake of the significant weakness since Wednesday's Federal Open Market Committee meeting. Further downside seems likely, with the difficulty coming in where the retracement will end.

One view is that we are unlikely to see the pair break through $1.2456 resistance and as such the current price, resting on the 76.4% retracement, looks like an interesting area for shorts. However, a retracement into the $1.2511-$1.2523 zone would be a less risky trade, yet would have the possibility of not getting filled.

Either way, a bearish view remains in place unless we see price post an hourly close above $1.2568.

USD/JPY consolidates after rally

Recent weeks have seen significant gains for USD/JPY, with the pair rising 17% since its November low. The current consolidation is likely to result in yet another move higher for the pair and as such longs around the lower end of this consolidation look attractive.

So do longs upon seeing an hourly close above ¥118.66. In either case, a bullish outlook is in play unless we see an hourly close below ¥117.65

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