

The dollar decline has eased, with EUR/USD heading lower and USD/JPY consolidating. However, with the trend clearly defined, there is a good chance we will see a move back on trend before long.

EUR/USD retracement could be over

EUR/USD is rallying up to yesterday’s high of $1.2454, with a break through that area pointing towards a possible bullish resurgence after the recent pullback.

The ability to post an hourly close above that level will determine the outlook for the pair going forward. Should that occur, we would be looking at the confirmation of a higher low, which would provide a bullish signal of note, when accompanied by a new high. 

EUR/GBP provides a wider retracement

EUR/GBP broke below the crucial £0.8767 support level yesterday evening, providing a bearish signal following the formation of a rising wedge formation.

This does not necessarily negate the wider bullish resurgence, but instead points towards a wider retracement of the £0.8687-£0.8833 move. Thus far, we have moved into the 50% retracement, but there is a strong chance we could move further to the downside. With that in mind, watch out for a possible short-term downside. However, with Fibonacci support at £0.8743 and £0.8721, a bullish rebound is expected before long. A break below £0.8687 would be required to negate this bullish outlook.

USD/JPY in consolidation mode

USD/JPY has been consolidating so far this week, coming off the back of a clear downtrend for the pair.

The symmetrical triangle we are seeing is formed of lower highs and higher lows, which must be broken to signal the next move. For confirmation of another leg lower, it makes sense to look out for an hourly close below the previous low of ¥108.28 for a bearish sell signal. Otherwise, there is a chance we could see some form of countertrend retracement. 

