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Risk-off sentiment helps lift the dollar, impacting EUR/USD, GBP/USD, and USD/JPY

Risk-off sentiment hits EUR/USD and GBP/USD, while USD/JPY starts to reverse higher after recent declines.

EUR/USD heads lower as Europe braces for fresh lockdowns

EUR/USD has been under pressure once again, with rising cases of a more contagious Covid-19 variant sparking fresh lockdowns in mainland Europe.

The prior retracement into $1.199 ultimately sent the pair back into a four-month low. With that in mind, there is a strong chance we could see the further downside from here. A break-up through the $1.199 zone is ultimately required to negate this bearish trend. Until then, near-term upside is likely to be sold into.

GBP/USD drops out of consolidation zone

GBP/USD has also been hit from a risk-off move, with the pair falling out of its recent range by taking out the $1.3779 level. That signals a continuation of the recent declines, bringing expectations of further downside.

However, with the stochastic oversold, there is a chance we could see near-term gains as momentum starts to swing in the opposite direction. As such, while we could see short-term relief, a break-up through $1.4006 would be required to negate the current bearish outlook.

USD/JPY breaking higher after recent pullback

USD/JPY has been gradually losing ground over the course of the past week. However, with a clear uptrend in play, there is a strong chance we could see the pair start to reverse higher from here.

A break below the ¥108.33 swing-low points towards a potential bearish continuation. However, with price rising through the upper threshold of a bullish wedge formation, there is a strong chance we see a bullish resurgence here for USD/JPY. Keep an eye out for the ¥108.87 level as a potential bullish breakout signal if price rises through it. Conversely, a break below ¥108.33 would be required to negate this bullish outlook.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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