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

EUR/USD and GBP/USD continue to drift lower, following a 61.8% retracement earlier in the week. Interestingly we are seeing a similar move for USD/JPY, with a 61.8% retracement leading to a morning of selling pressure.

EUR/USD weakens from 61.8% retracement

EUR/USD weakened throughout much of yesterday, following a rally into the 61.8% retracement earlier in the week. There is a strong chance that we are seeing a retracement, set within the wider downtrend.

However, with flatlining lows coming around the crucial historical $1.1554 support level, there is also a possibility that we will form a base here, with a rally through $1.1852 pointing towards a more bullish phase coming into play. As such, there is an argument for both sides, which highlights the importance of obtaining a strong risk-to-reward, or else waiting it out. A rally into the 76.4% retracement looks attractive for shorts, while the option to wait it out would mean watching for a break above $1.1837, or below $1.1508 to dictate the directional bias.

GBP/USD continues decline from Fibonacci resistance

GBP/USD has similarly been turning lower after perfectly respecting the 61.8% Fibonacci retracement level last Friday.

The wider downtrend in play points towards a likely continuation of this weakness, with a break below $1.3102 looking likely before long. A break above $1.3447 would be required to negate the downtrend that has been in play for two months now.

USD/JPY declining within gradual market turnaround

USD/JPY has followed the lead, with a 61.8% retracement leading to a market sell-off. Interestingly, despite the similarity with EUR/USD and GBP/USD, this is seeing USD weakness against the dollar, rather than strength.

This is highlighting the potential weakness for pairs such as EUR/JPY and GBP/JPY. USD/JPY has been seemingly topping out over the past fortnight, with lower highs and lows being formed. This comes into question once again, with the retracement and sell-off we are currently seeing. A continuation of that reversal comes with a fall below ¥109.36 support. This bearish outlook remains in place unless we see a rally above the ¥110.75 high. 

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