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

EUR/USD is the chief loser this morning, with the price breaking to an almost two-month low. Meanwhile, GBP/USD trades within an edge, and USD/JPY shows signs of a bearish reversal.

Japanese yen
Source: Bloomberg

EUR/USD falls below key support levels

EUR/USD has dropped below the $1.1861 and $1.1837 support levels this morning, with the pair now testing the $1.1823 low. The break below those support levels, coupled with a retest of the $1.1861 as new resistance, points towards further downside from here. Watch out for an hourly close below $1.1823 as confirmation of this bearish outlook, with a likely strong move lower in response.

We would need a break up through $1.2004 to negate this bearish view. As such, even a rally would provide a bearish selling opportunity as long as we do not break the $1.2004 mark.

GBP/USD expected to move higher within consolidation

GBP/USD has moved back to the lower end of its recent range, with the pair creating a falling wedge over recent days. Given the continued consolidation, there is a good chance we could see another move higher from here, with the range top around $1.3619 the obvious near-term resistance level.

However, with the wedge formation now in play, it makes sense to look for longs around the bottom of the pattern, with the price having moved into trendline resistance. The wedge is a bullish pattern, pointing towards an ultimate breakout to the upside.

USD/JPY showing signs of potential reversal

USD/JPY broke through trendline support yesterday, following the news that the Japanese government has called a snap election for October. More importantly, we saw a break below the ¥111.65 swing low, bringing about a lower low for the first time in almost three weeks.

With that in mind, further downside could come about from here, in an extension of the reversal signals given yesterday. A bullish signal would only come with a break through ¥112.33. Until then, rallies look likely to be sold into.

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