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As we approach the end of the first month of 2017, the team at Citi examines EUR/USD and GBP/USD:

Here is their view, courtesy of eFXnews:

In the short run, we continue to expect EURUSD and GBPUSD to test major resistance levels, which is consistent with our roadmap from 1999, before turning again later.

Looking back to 1999, as the DXY started turning higher in October of 1999, it did not rally against JPY. The rally was against European currencies, and it is these crosses – largely EURUSD and GBPUSD – that we believe will trend for the USD over the months ahead.

A month after the June 1999 Fed hike, EURUSD posted a bullish monthly reversal (July 1999), and the DXY Index posted a bearish one. We may well see the same again this month.  The monthly close levels to watch this month are

– EURUSD: 1.0875 –  A monthly close above would result in a bullish monthly reversal targeting a decent gap to the 200 day which currently stands at 1.1017.

– USD-Index: 99.43 –  A monthly close below would result in a bearish monthly reversal

If seen, it would add to the short-term bias of USD weakness. Beyond this short-term bounce, the overall picture still looks bearish for EURUSD just as we saw in the last cycle.

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GBP/USD:  Taken out the reverse head and shoulders neckline, 55 day moving average and previous falling trendline which all converged between 1.2406-1.2415

This break suggests a rally to 1.2842 which would be the reverse head and shoulders target.

Good resistance levels are at 1.2775-1.2798.