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

Dollar weakness has prompted a rally in cable, while central bank news has put new fight into AUD/USD. 

EUR/USD forex pair
Source: Bloomberg

GBP/USD May pullback looks to be at an end
A 150-point move in cable since yesterday’s lows may well mark the end of the May pullback, with a bounce off the 50-day/100-day SMAs (simple moving average) and a push back towards the key resistance zone around $1.4550. A break above here would target the $1.4670 peak from the beginning of the month, and then on to the 200-day SMA at $1.4815.

It would likely pay not to chase such a big move, especially with CPI data on tap this morning, but overall it looks as if the stance here should shift towards short-term bullish. Only a move back below $1.44 and then through the Friday/Monday low would negate this thesis.

EUR/USD targets the upside
So far the euro has not taken advantage of USD weakness in the same way as sterling, but for the third day the $1.13 level has held, while for a second session the pair is holding above the 50-day SMA ($1.1309).

The first target on the upside would be $1.1387, and then on to the $1.15 area and the peak above $1.16 we saw towards the beginning of the month. Any close below $1.13 would return us to a bearish view, with the next area to watch being $1.1223. 

AUD/USD bulls have an opportunity
The Reserve Bank of Australia’s unwillingness to cut rates has given the bulls the chance they were looking for, with the bounce off the 200-day SMA ($0.7260) providing a near-perfect alignment of technical and fundamental factors.

The general recovery in risk appetite is helping too, and now we look for a break above $0.74 to then suggest a sustained move towards $0.75, which was key support in March/April, is underway. Essentially, it will take a move below the 200-day to cancel out this bullish hypothesis.

USD/JPY continues to rally
A 300-point rally here is now heading towards the 50-day SMA (¥110.28); previous rallies to this indicator have run out of steam so far this year, so bulls should be careful, but dip buying may still prove successful.

A break above the 50-day would head towards the late April high at ¥112, while for the moment it looks as if it will take a move back below Y108 to negate the current outlook. 

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