The FX markets are showing strong reversal signals following on from highly trending markets this week. However, with the US jobs report around the corner, will the market confirm a reversal before fundamentals play their part?

Pound and dollar
Source: Bloomberg

EUR/USD retraces within bullish trend

EUR/USD has continued to trend higher, with the pair gaining over 150 points from yesterday’s low to high. We are seeing the pair retrace once more, yet the depth for this retracement seems a likely reflection of the strength of the rally seen yesterday.

As such, a bullish outlook remains in play, unless price closes convincingly below $1.0826 on the hourly timeframe. Until then, it seems prudent to watch out for any bullish reversal signals in the shorter term timeframes.

Resistance levels of note are at $1.0883, $1.0904, $1.0944 and $1.0984. Support levels to watch are at $1.0826, $1.0808 and $1.0781.

GBP/USD showing signs of a resurgence

The downtrend in GBP/USD is showing signs of abating, with price having gained ground after coming into contact with the April 2015 low of $1.4566 and long-term ascending trendline support.

We have not yet seen the necessary signs that a bullish view should be taken but certainly we are open-minded regarding a potential rally.

The key here is an hourly close back above $1.4645, which would provide the bullish signal for a strong end to the week. Until that happens, the view is now neutral unless we see a convincing close below $1.4566 or above $1.4645.

Resistance levels of note are $1.4645, $1.4663 and $1.4693, with support levels at $1.4566, $1.4230 and $1.3504.

EUR/GBP reaches crucial resistance level

EUR/GBP has sold off from a critical resistance level overnight, following on from a major rally to start off 2016.

The £0.7483-£0.7500 zone represents the top of the past two rallies in 2015 and thus this marks the perfect place for a bearish reversal. So far, we have seen part of a reversal pattern, with confirmation coming with a closed hourly candle below £0.7425.

Should this occur, a bearish bias would become active, with support levels of £0.7416, £0.7408 and £0.7389 in view.

Without a move back below £0.7425, we would need a convincing close back above £0.7500 to regain the bullish view. 

USD/JPY seemingly on the turn

USD/JPY has rallied heavily overnight, with price breaking through an intraday double-bottom neckline at ¥118.25.

We are currently seeing the 50-hour simple moving average providing support, with a likely break higher seemingly on the cards. However, a close back above ¥118.70 would be needed for greater confidence of a bullish reversal given the strength of previous support and resistance around this level.

As such, we have seen the infancy of a bullish reversal, yet confirmation is still required. Resistance levels of note at ¥118.70, ¥118.79 and ¥119.50. Support levels of note are ¥118.06, ¥117.66 and ¥117.32.

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