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

Much will depend this week on what the Federal Reserve does, with major potential ramifications for the US dollar. 

GBP/USD
Source: Bloomberg

GBP/USD dependent on article 50

A potential activation of article 50 this week offers the chance of volatility in sterling, at least in the short-term. We have seen the pullback in GBP/USD begin to slow, with a possible base of support being formed around $1.2150.

A rally into the 200-hour simple moving average (SMA) of$1.2231 has pushed the pair to its highest level in around a week. A breakout from here could see $1.2366, and then the 50-day SMA at $1.2384 tested. A break of $1.2150 would be needed to reassert bearish momentum, potentially opening the way for a move below the $1.20 level again.

EUR/USD to hold or not to hold?

The $1.0640 resistance zone for EUR/USD highlighted last week appears to have been broken, and having edged lower, we are now waiting to see if the $1.0680 peak from the second half of February can hold.

A move above here would open the way to another test of $1.08, last seen at the beginning of February. It would take a move back below $1.0640 to suggest the pair is about to retest the $1.05/$1.0520 area.

USD/JPY awaiting the Fed meeting

The direction of USD/JPY will depend largely on the Fed meeting on Wednesday. We saw a spike higher though last week, taking out the mid-February and early March highs just below ¥115.

The drop back on Friday saw the price bounce off the 100-hour SMA (¥114.53) and, with the pair still heavily oversold intraday, a bounce could be in the offing. Nonetheless, the weakening of the bullish momentum could hand the advantage to the bears, with a close below ¥114 signaling a loss of upward momentum.  

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