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

The dollar is coming back into strength, with EUR/USD mimicking the GBP/USD sell-off seen earlier in the week. Meanwhile, USD/JPY has broken through the key resistance level.

Dollar and pound
Source: Bloomberg

EUR/USD rebounding after sharp sell-off

EUR/USD suffered at the hands of a strong dollar, with the pair breaking below the crucial $1.0719 support level. This confirms it was GBP/USD leading the way when we were seeing mixed messages across the markets earlier this week.

The current rally looks like a short-term one, set within a wider move lower. A bearish outlook is in play unless we break through the $1.0773 swing high. The wider trend looks like we may have bottomed out, with the current pullback likely to find support between $1.0652 and $1.0592 (61.8-76.4%). As such, we should see further downside, with any short-term rally to be sold into.

GBP/USD rebounds into fib retracement

GBP/USD managed to gain ground overnight, following a sharp pullback earlier in the week. Given that the initial pullback dragged the pair below the $1.2424 swing low, we are looking at this current rally as a short-term move to be sold into.

It has so far managed to reach the 61.8% Fibonacci retracement and we could see the pair turn lower from here. Any further upside would be seen as a better selling opportunity until we see a break back above $1.2616.

USD/JPY breaks through crucial resistance level

USD/JPY has managed to rally through the key ¥111.59 resistance level overnight, completing an inverse head and shoulders in the process. The fact this has happened means we are likely to see a more protracted move higher to retrace some of the sell-off seen earlier in the month.

As such, while the price remains above ¥110.71, a bullish short term outlook is in play. Watch out for Fibonacci support, with the 50% in particular coinciding with the Wednesday night peak of ¥111.45.

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