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

EUR/USD and GBP/USD push through key resistance, while USD/JPY completes an inverse head and shoulders formation.

Yen and dollar notes
Source: Bloomberg

EUR/USD punches higher from deep retracement

EUR/USD punched higher yesterday after a very bullish assessment from Mario Draghi. This brought us back above the key $1.1285 resistance level, thus ending any hopes of the bears given the inability to fall below $1.1110.

Thankfully we hit the 76.4% first, bringing with it a nice risk-to-reward trade. For today, we are heavily extended to the upside. While we could see further upside, it is going to be difficult to carve out a decent trade given the distance to the most recent swing low of $1.1171. As such, watch out for retracements or intraday continuation patterns. A break back below $1.1171 would negate this bullish outlook.

GBP/USD rallies through key resistance level

GBP/USD managed to break through the crucial $1.2818 level yesterday, bringing with it the potential for further upside. However, given the extended nature of this rally and the long upper shadow seen last night, there is reason to believe we could see some weakness in today’s session.

Looking onward from that, there is a possibility that we will come back into trendline and Fibonacci resistance at $1.2886. However, this is certainly a bullish development that brings into question the longevity of this long-term downtrend.

Inverse head and shoulders points to further USD/JPY gains

USD/JPY has broken through the ¥111.79 resistance level, thus completing an inverse head and shoulders formation. We are now gradually moving higher, and this is expected to continue apace in the coming days. Watch out for trendline resistance up ahead.

Ultimately, we will need to break through ¥114.37 to provide a long-term bullish shift for this pair. For now, the short-term picture certainly seems to point towards further gains. A break back below ¥111.45 would negate this view.

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