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

Dollar strength is the name of the game, with USD/JPY breaking higher and EUR/USD and AUD/USD weakening. Will this continue apace or are we set for a turnaround?

Euro and US dollar notes
Source: Bloomberg

EUR/USD rally may not last

EUR/USD has started creating lower highs and lower lows over the past 48 hours, despite early indications that we were set for a deeper retracement of last week’s sell-off. That is still a possibility, yet for now, we are seeing short-term price action following the wider trend of weakness. Thus, it seems worthwhile watching for another turn lower.

With that in mind, shorts around the $1.0924-$1.0928 region look appealing, for a 2:1 or 3:1 risk-to-reward trade to remain within this short-term downtrend. This outlook remain unless we break back above $1.0942, with the initial target at $1.0883.

Beyond this short-term idea, the wider trend is one of weakness and whether we get a deeper retracement into the $1.0968-$1.0995 region or not, it is likely we will see the market turn lower soon enough.

USD/JPY breaks into bullish trend

IN_USDJPY has broken clear of the crucial ¥104.63 resistance level, bringing with it a bullish medium-term outlook for the pair. We are seeing price turning lower this hour and that could provide us with a good entry given the recent swing low is so close (¥105.07).

As such, a retracement into the 50% or 61.8% Fibonacci retracement looks like an interesting area to get into the trend. A break back below ¥105.07 wouldn’t necessarily negate the trend, yet it would point towards a deeper retracement of the strength we have seen this week, with a move back into ¥104.87 or ¥104.63 a possibility.

AUD/USD falls into key support area

AUD/USD managed to fall back below the key $0.7587 region overnight, bringing price back towards the ascending trendline of a nine-month symmetrical triangle. With the 76.4% (0.7560) retracement also marginally higher than the trendline, it makes sense to look for longs around that area. We would need to see an hourly close below $0.7507 to negate this bullish view.

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