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

The dollar seems to be back in control, with EUR/USD, GBP/USD, and AUD/USD all selling off sharply in the wake of yesterday’s ECB meeting. 

Euro and dollar
Source: Bloomberg

EUR/USD falls below head and shoulders neckline

EUR/USD fell sharply yesterday in the wake of the latest European Central Bank (ECB) meeting, taking the price back below the crucial $1.1662 support level. That level is key, because it denotes a head and shoulders neckline on the wider daily timeframe. With that in mind, this provides us with a clear bearish bias to play with.

Given how extended this downside move is, it makes sense to await a retracement of yesterday’s sell-off, or else a continuation pattern such as a pennant or flag to trade around. Ultimately further downside is expected, but with our most recent swing high all the way up at $1.1837, it makes sense to see if we can get some form of consolidation or retracement to provide us with a closer stop loss.

GBP/USD breaks below crucial support level

GBP/USD has also broken below key support, with the move below $1.3110 bringing a less clear picture for the pair. The lower low that now accompanies Wednesday’s higher high means the market is now in a broadening formation. This lack of direction needs to be resolved to gain confidence going forward.

A break below $1.3087 would provide greater confidence of a bearish shift for the pair, where the next support level comes in at $1.3030. However, until that happens, there is a good chance of a bounce, given the extended nature of a move. 

AUD/USD breaks key support

AUD/USD has broken below a crucial support trendline, clearing out the final major hurdle. With that in mind, it looks likely we will see further downside to come.

As such, look for the continued creation of lower highs and lows. It is preferred to sell into rallies, where the bearish outlook remains in play unless the price breaks above $0.7719.

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