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

Dollar strength has started to unravel with Donald Trump’s mention of an overvalued dollar. Could we be seeing a turnaround for the likes of the GBP/USD and EUR/USD?

Pound and dollar
Source: Bloomberg

EUR/USD moving into Fibonacci resistance

EUR/USD has continued its ascent, with the pair continuing to create new intraday highs following yesterday’s rally through $1.0685. Current resistance is being provided by the $1.0710 level (January 2016 low), with the pair looking likely to continue its ascent.

However, there are two ways of looking at this. One is that we have seen a bottom for the pair, coming at the lower bounds of a two-year range. With that in mind, there is a possible resurgence on the cards for a move back into the $1.1500 region as we saw in 2016. Conversely, we are moving into the 70% and 76.4% retracement, which could cap the recent resurgence and send the pair lower once more.

The rising wedge we are currently seeing points towards the potential for such a pullback. However, until we negate the creation of higher highs and higher lows, the first scenario continues to look a possibility.

Will GBP/USD follow up yesterday’s rally?

GBP/USD has managed to break through the crucial $1.2315 resistance level yesterday, in what was an incredible day for the pound. Yesterday’s trendline break, accompanied by the $1.2315 break looks as though it could pave the way for a more bullish period for the pair.

However, we would need to see a break through $1.2433 to raise the likeliness of a bullish phase for the pair. For now, we are likely to be in a retracement phase, yet given the steep rise yesterday, any positions will be difficult and thus it makes sense to await a break back above $1.2433 or below $1.1986.

USD/JPY continues to trend lower

USD/JPY has been in a relatively consistent trend lower over the two weeks, with this morning’s rally moving into trendline resistance once more.

The key here is the ability to remain below the ¥114.28 resistance level. Should that occur, then further losses seem likely for the recent downtrend to continue. The next key support level to watch comes in at ¥111.44.

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