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

Strength in sterling has carried cable back above $1.31, while yen weakness persists on hopes of more easing.

Sterling and euro notes
Source: Bloomberg

GBP/USD

A recovery here has seen cable move back above $1.31, having explored the area around $1.28 last week. So far that latter level is holding as support, and while the BoE meeting this week is likely to see policy loosened, we could expect further strength in advance of the meeting.

The next resistance level to watch is $1.32, and then above this on to $1.3540, with the pair needing to fill the 24-27 June gap at $1.36. A drop lower and break below $1.28 would signal further pushes into territory not seen since the mid-1980s. 

EUR/USD

The euro has rediscovered some of its strength in recent days, but essentially remains stuck in a consolidation pattern with some bearish elements to it.

However, the $1.10 area continues to hold, so we may see the upward move gather some pace, perhaps pushing on towards the 50-day simple moving average at $1.1232. A move through here for the index targets the June high at $1.14. 

AUD/USD

The rally goes on here, with the break through the Friday/Monday high clearing the way for a test of the 23 June peak at $0.7350. A move through this level would then head towards $0.78, last seen in mid-April.

A close below $0.76 would hand the initiative back to the sellers, although they would need to get the price below $0.7550 to really suggest a new leg lower is in process. 

USD/JPY

A second day of yen weakness is causing the pair to push through the peak seen at the end of June around ¥103.40. A close above here might suggest ¥104 and then ¥106 may be tested if the pair can maintain upward momentum on hopes of more easing.

Otherwise, a close back below ¥103 would raise the prospect of a move to the low seen at the end of last week at ¥100, although at present it seems that the yen’s weakness will persist. 

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