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

Will we see further dollar strength, following a period of weakness across EUR/USD and AUD/USD? Given the rally in GBP/USD, there is also a case for the pair to begin selling off once more from here.

Euro notes
Source: Bloomberg

EUR/USD downtrend continues

EUR/USD has been selling off in a consistent manner since topping off last week, with a break below $1.0719 in particular leading to a more bearish outlook. That said, this pullback is seen within a wider context of higher highs and higher lows on the daily timeframe.

As such, look out for this current sell-off to be a potential retracement of the rally from $1.0494, with the Fibonacci support levels coming into view. We have seen the 61.8% come into play already, marking the low of last week. An hourly close below that level points towards another decent leg lower, with $1.0591 (76.4%) a potential destination. Conversely, an hourly close above $1.0702 could signal that the 61.8% is the ‘be all and end all’ for this sell-off.

GBP/USD rallies into key Fibonacci retracement

GBP/USD is turning lower this morning, following a period of strength that has seen the pair move back into the 76.4% retracement. This is particularly notable given that we broke below $1.2424 last week.

That means that we are likely seeing a market reversal here, and as such a deep retracement is often evident in such circumstances. A bearish outlook is in play here, with a break through $1.2316 required to negate this view.

AUD/USD approaching crucial support level

AUD/USD has sold off sharply throughout Friday, with the pair approaching the $0.7587 support level. That is an absolutely crucial mark which, if broken, would lead us to a significantly more bearish outlook for the pair. Given that we are seeing a wider move from a crucial trendline and horizontal resistance zone ($0.7740 upwards), there is a good case for a market top here.

The creation of a lower high since a break below $0.7587 would provide us with a new low, thus pointing towards a downtrend for the pair. As such, much of today will be dictated by the ability or inability to break this level, given the consequences of either scenario.

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