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

Rumours of a major delay to the US tax reform process has seen dollar weakness in play. However, with the likes of EUR/USD and AUD/USD rallying into deep retracements, another leg lower still remains the preferred outlook.

Source: Bloomberg

EUR/USD rallies into deep retracement

EUR/USD punched higher in the second half of the week, with a raft of EUR positive growth forecasts coupled with USD negative news regarding tax reforms hitting the pair.

However, we are not out of the downtrend yet, and with the price rallying into a wider retracement between 61.8% and 76.4%. As such, there is a good chance we could see the pair begin to turn lower once more as we close out the week, with a move back above $1.1691 required to negate the bearish bias.

GBP/USD consolidating within broadening formation

GBP/USD is trading within a triangle formation, following on from a rally off the bottom of a broadening pattern. The break below $1.3109 earlier in the week provided a clue that perhaps the upside wasn’t going to be so easy this time.

We have subsequently been trading within a symmetrical triangle formation, where a break below $1.3085 would signal a likely return to the crucial $1.3030 support level. Alternately, a move up through $1.3177 would provide a signal that we could continue within this broadening formation to head higher once more.

AUD/USD needs to turn lower

AUD/USD has been moving higher in a meaningful manner in recent days, with the recent dollar weakness providing greater upside for the pair.

This has taken us into a deep retracement, where we need to see the pair move lower in the near future, or else it will break out of the bearish reversal pattern seen over the past week. With that in mind, a bearish outlook remains in play, but a break up through $0.7701 would negate this view by providing a higher high. 

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