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

EUR/USD remains becalmed as jitters persist before the next round of French elections, but sterling is being bolstered by further positive PMI numbers.

Pound and dollar
Source: Bloomberg

EUR/USD eyes $1.0835

As the second round of the French election creeps closer, it is not surprising to see the pair stuck below $1.0950. Upward gains will be hard to sustain until it is certain that Marine Le Pen will get nowhere near the levers of power.

A break above $1.0950 targets the descending trendline off the summer highs, which would imply a test of the zone around $1.10. For now $1.0906 is support once again, and then below this we look to $1.0829 and also the 200-day simple moving average (SMA) at $1.0835.

GBP/USD could see $1.3427

Yesterday’s excellent PMI reading from the manufacturing sector sent the pound flying once more, with a dip to $1.2864 bringing out buyers again. Cable has yet to breach $1.2965, the high from the end of April, but if it does the next areas to watch would be $1.3064 and then even on to $1.3427 on a longer-term view.

A break of $1.2775 would be bearish in the short-term for GBP/USD, but even then the rising trend from the March low is still firmly intact.

USD/JPY could see shorts around ¥112.86

The pair continues to exhibit bullish characteristics, moving above the 50-day SMA (¥111.70) for the first time since early March. Before getting too excited, it should be noted that this proved to be the nemesis of the bounce from late February to early March, and was followed by a steady drop all the way into mid-April.

Even if we see more gains, the downtrend line off the January high comes into play around ¥112.86, and would likely see many shorts coming back to take advantage of this descending resistance line. 

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