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

The dollar suffers heavily after the Federal Reserve pushed back against the idea we could see more than the planned two rate hikes. Will the break higher for EUR/USD, GBP/USD and AUD/USD mark the beginning of something bigger?

US dollar and pound
Source: Bloomberg

EUR/USD bounce continues uptrend

EUR/USD rallied through the key $1.0714 level overnight, following a Federal Reserve-fuelled dollar weakness story, and the relief that Geert Wilders has been overcome in Dutch elections. We are seeing the pair pull back this morning, moving back into the $1.0714 support level. 

A break below there could spark a period of weakness as we retrace some of yesterday’s sharp gains. Conversely, an hourly close above $1.0745 would point toward a continuation of recent gains for the pair. In either case, the wider bullish trend has been validated once more, with further gains seemingly likely, irrespective of whether we see a retracement or not. This is the case until we break the previous low ($1.0603 currently).

GBP/USD retracing after spike higher

GBP/USD gained sharply yesterday evening, following the FOMC announcement, with the pair creating a new higher high. The current weakness looks like another pullback before we move higher again. Yesterday’s retracement came into the 50%, and this one could be similarly shallow.

However, the deeper it goes, the better the buying opportunity, with a move into $1.2209-$1.2218 of particular interest. That said, with the price currently at yesterday’s high of $1.2257, there is a chance we could see gains from here. Essentially, a bullish outlook is in play until we break back below $1.2178.

AUD/USD rallies into major resistance zone

AUD/USD has also seen substantial gains, with the pair rallying towards the crucial $0.7732-$0.7835 resistance zone. The lower bound of that zone is also joined by a hugely significant descending trendline, currently at $0.7734. Given the sharp rally into this region, there is a good chance we could see the pair turn lower over the short term at least.

For that to come into fruition, an hourly close below $0.7676 would be required. If that occurs, the $0.7633 level would be well worth watching out for as the key support level. Should we break higher again, watch out for the $0.7734 area as a big roadblock to further gains.

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