FX markets attempt to adjust to last week’s volatility, with the US dollar beginning the week in a strong way.

Pound and dollar
Source: Bloomberg

EUR/USD drifts lower

EUR/USD has been drifting lower following the massive European Central Bank fuelled spike on Thursday.

Given the strength of Thursday’s move higher, this current pullback looks like it could be a precursor to another move higher. However, for that to happen, a close above $1.0886 would need to occur.

Until we see that break, the downtrend remains in play since the $1.0981 peak and thus the current downside will look towards $1.0833 and $1.0808 as the next support levels to note.

GBP/USD breaking through support

It's a similar story for GBP/USD, which is breaking lower in a continuation of the weakness we have seen since the Thursday rally.

The fact that price is breaking through $1.5078 support provides clues that further downside could be yet to come and a close below $1.5078 would be a bearish indicator.

Thus unless price closes back above $1.5115, a bearish view holds, for a continuation of this recent downside.

Support levels of note are at $1.5053 and $1.5027, while resistance levels are at $1.5078, $1.5107 and $1.5115.

USD/JPY continues to rally

USD/JPY is seeing yet another surge higher this morning, in a continuation of the uptrend seen since the pair bounced at the ¥122.30 support level.

On the whole, we have seen USD/JPY top out between ¥123.60 and ¥123.72 in the past month. With this in mind, it seems likely that this pair will continue to trend higher, at least until we reach the ¥123.60-¥123.72 resistance zone.

This bullish view remains unless prices closes back below ¥123.24. 

AUD/USD selling off from resistance

AUD/USD has been selling off heavily since hitting the $0.7382 resistance level on Thursday.

This represents the October peak and while price did briefly move above that level to create a new three-month high, the formation on a large daily spinning top pointed towards the potential for a period of downside.

Price has just broken through the 50-hour simple moving average and is trending lower. However, despite this clear weakness, price will need to move below the $0.728 to truly provide a bearish outlook.

Despite that, the bears seem to be in control for the time being, where $0.7297 and $0.7280 will be crucial to understanding if this is the beginning of something bigger. Resistance levels to watch are at $0.7320, $0.7338 and $0.7343.

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