Watching out for possible reversals, it is clear that EUR/USD and USD/JPY have the potential to revert back to the longer-term trends. We await specific levels to be broken as a signal that such moves could be occurring.Watching out for possible reversals, it is clear that EUR/USD and USD/JPY have the potential to revert back to the longer-term trends. We await specific levels to be broken as a signal that such moves could be occurring.
Will EUR/USD break higher from recent downtrend?EUR/USD has continued to trend lower following Friday’s peak, with the pair creating a new intraday low yesterday. However, the wider picture shows we remain within a wider uptrend following the major swing highs set in July and August.
Last week saw price rally off the 76.4% retracement and we are currently looking to find out whether the pair will surpass that support level or validate it by breaking higher once more. Price is currently being supported by a short-term ascending trendline and as such we will take our lead from the ability (or inability) to break through $1.1182.
Should that occur, it would point towards a resurgence in the pair and a bullish outlook for the week. Conversely, a break lower and especially below $1.1122, would provide a continuation of the recent short-term downtrend.
Will GBP/USD break resistance on second attempt?GBP/USD attempted to break through the crucial $1.3372 resistance level yesterday, only to fall back sharply. This level is crucial as it is the swing high from August which, if broken, would negate the creation of lower highs that have been in place since mid-July.
As such, today’s price action will be dominated by how price action reacts to this level. A break could provide a strong upward breakout, whereas another failure to push through this level could spark a sharp move lower.
USD/JPY forming potential head and shoulders pattern
USD/JPY has run into trendline resistance dating back to February, with price weakening since. However, crucially we are now seeing the pair forming a potential head and shoulders pattern which could see the selling really pick up pace.
With that in mind, it makes sense to await a break and hourly close below ¥103.06 as a means to become bearish once more. This would also match up with the longer-term bearish trend and as such, it makes sense to wait and see if that break occurs and play it from there.
The inability to break that level would point towards a potential continuation higher. However, given trendline resistance, it might make sense to await a leg higher through resistance before becoming bullish once more.
