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

Short-term losses for the dollar look likely to lead towards a period of upside, building on last week’s strength. However, could the Aussie dollar trump the greenback?

Dollar note and pound sterling coins
Source: Bloomberg

EUR/USD upside unlikely to last

EUR/USD has managed to gain some ground this morning, following a sell-off into $1.0620 support last week. With price attempting to break through the near $1.0653 resistance level, it makes sense that we could see a retracement of the $1.0714-$1.0607 sell-off.

With that in mind, short-term upside is expected to be limited to a retracement around the 61.8%-76.4% region ($1.0674-$1.0689). That would represent a very interesting area for shorts. This bearish outlook would be negated with a break through $1.0714.

GBP/USD looks set for downside

GBP/USD has also managed to claw back some gains following a weak end to last week. That retracement into the 61.8% level preceded a break below the notable $1.2475 level, pointing towards another leg lower.

With that in mind, we would need to see a break through $1.2582 to provide a more bullish outlook, but even then we would be looking at the 76.4% ($1.2622) level as another roadblock to further upside.

That said, it looks like we are likely to turn lower soon, with the stochastic indicating momentum is starting to wane just as we post a bearish shooting star candle. 

The Aussie looks to outdo the greenback

Amid the potential for a dollar resurgence, it is worth watching AUD/USD, which is consolidating following a bullish triangle breakout. Up ahead lies a big area of resistance ($0.7688-$0.7695) which must be overcome for a bullish breakout to come into fruition.

However, for now it looks as if any downside is going to simply set up another leg higher for the pair. This bullish view would be negated with a break below $0.7634.

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