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

The dollar strength story continues to dominate. Will the recent countertrend moves prove fleeting, or something indicative of a shift in emphasis?

Pound and dollar
Source: Bloomberg

EUR/USD rally unlikely to last

EUR/USD has been gaining ground since yesterday’s drop to $1.0352, yet with that 14-year low came a new lower low on an intraday basis, thus justifying the continued bearish outlook.

This current rally looks unlikely to last past the $1.0480 swing high and as such, the gains seen over the past 24-hours seem like a retracement of that move lower from $1.0480. Thus a bearish view remains below that level, with rallies into the $1.0431-$1.0450 zone providing another attractive shorting opportunity.

GBP/USD looks set for next leg lower

GBP/USD has been descending sharply since last week’s trendline break. Crucially we have seen price fall back to the $1.2302 mark, representing the mid-November low. A break below there would provide us with a strong bearish signal for the medium-term.

However, for now we have a short-term downtrend in play, which points towards the likely break back to and through the $1.2302 mark. That being said, given the importance of that level, it perhaps makes more sense to await the break and ride the trend from there. A bearish view remains in place unless we see an hourly close above $1.2510.

USD/JPY back to trendline support

USD/JPY is consolidating following another bout of strong gains last week. This morning has seen price come into an ascending trendline of support which originates from the November low of ¥101.22.

Clearly given the inability to break to a new high yesterday, there is a degree of hesitancy to this trend. However, until we see price break both trendline and the key ¥1116.21 support level, the bias remains to the upside. 

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