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

Dollar weakness is driving markets at present, as geopolitical concerns rise. A break below key support for USD/JPY is particularly noteworthy.

Euro and dollar notes
Source: Bloomberg

EUR/USD looking strong

Further gains reinforce the impression that euro bulls have returned. The recovery yesterday of the rising daily trendline underscores this point.

EUR/USD still needs to take out $1.0635 on the intraday charts to create a new higher high, but the signs look good. Above $1.0635 the next target would be the $1.0680/$1.07 area. A bigger move higher would still target the 200-day simple moving average (SMA) at $1.0850. Only a close below $1.0570 negates this bullish outlook.

GBP/USD facing a test

The longer-term narrowing wedge that prevails here is about to be tested once again, with the possibility that further sterling strength will push GBP/USD to the descending trendline, around $1.0565. 

USD/JPY dropping

The drop below ¥110.11 would likely point towards much greater downside from this point onwards. The possibility is that USD/JPY will drop to the 200-day SMA at ¥108.70, or even down to ¥107.45, the high from July.

It would need a recovery back above ¥110.11 to reverse the bearish outlook, and even then a move back above ¥112 would be needed to create a new higher high on the short-term charts. 

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