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

Dollar weakness paves the way for European strength. However, GBP/USD is showing potential signs of weakness ahead of the Bank of England meeting.

Pound coin and dollar notes
Source: Bloomberg

EURUSD consolidates following sharp rally
EUR/USD has managed to rally sharply out of its downtrend, with the break through the $1.1165 level in particular sparking a more bullish outlook. This morning has seen price fall through pennant support.

However, we seem likely to be within a retracement and as such further gains are likely before long. The signal that this pennant break has been negated would be an hourly close above $1.1198. Until that occurs, we could be in for a deeper pullback, where Fibonacci support comes into view.

Will GBP/USD rally come under pressure?
IN_GBPUSD has seen a period of strength over the past three trading days, with Friday seeing a temporary spike through the crucial $1.3289 level.

We are seeing trendline support being broken currently, yet the key here is whether we see the pair post an hourly close below $1.3200. Given the lower high posted this morning, a move below the $1.3200 level would provide a bearish signal for a move back towards $1.3150 and $1.3117 support.

The bullish short-term trend would be brought back into play with a push above Friday’s high of $1.3300.

USD/JPY consolidating within downtrend
IN_USDJPY has rallied this morning, in a retracement of the sharp deterioration seen on Friday post-Bank of Japan. This weakness looks set to continue and as such, we are looking for another leg lower.

Current price action looks like a possible intraday double top formed this morning, with an hourly close below ¥102.30 providing the bearish signal for another leg lower.

Conversely, an hourly close above ¥102.68 would provide a signal that we could see a deeper retracement with ¥103.50 of particular interest. 

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