EUR/USD: accelerating lower, but downward potential still limited

EUR/USD Current price: 1.1143

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The dollar edged modestly higher against the common currency this Wednesday, as the pair was unable to retain the 1.1200 mark. Majors were confined to tight corrective ranges, as investors turned cautious ahead of the upcoming BOE economic policy decision this Thursday. In the data front, European final services PMIs for July came in generally better-than-expected, with the EU reading up to 52.9 from a previously estimated 52.7, providing evidence that the economic expansion continues at a moderate pace in the region. Retail Sales, however, came in with a soft tone, coming in at 0.0% in June after a 0.4% expansion in May, matching expectations. In the US, data were mixed, with the ADP survey showing that the private sector added 179K new jobs in July, whilst according to the ISM Non-manufacturing index the sector continues expanding, printing 55.5 against the 56.0 expected. The Markit Services PMI ended up at 51.4 beating expectations of 51.0.

Despite the modest recovery, the greenback remains vulnerable and at risk of further declines. The EUR/USD pair ended the day at fresh weekly lows around 1.1140, but ever since it has been trading within an 100 pips range since the week started, the move is not relevant enough to suggest an interim top. From a technical point of view and in the short term, the pair is at risk of extending its decline, given that in the 4 hours chart, the price has broken below its 20 SMA, while the technical indicators extended their declines within positive territory, and are close to cross their mid-lines towards the downside. Below the mentioned low, the pair can go down to 1.1085/1.1120, but further declines will depend on the outcome of Friday's US NFP release.

Support levels: 1.1120 1.1085 1.1040

Resistance levels: 1.1200 1.1235 1.1280

EUR/JPY Current price: 113.03

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The EUR/JPY pair consolidate its latest losses, pressuring the 113.00 level ahead of Wall Street's close, retaining the bearish bias seen on previous updates. The Japanese currency rallied on the back of plummeting stocks, as Nikkei edged roughly 2% lower on increasing distrust over the effectiveness of Abe's latest announcements. The 1 hour chart shows that the 100 and 200 SMAs have accelerated their declines above the current level, with the shortest now around 114.30, while the Momentum indicator hovers below its 100 level and the RSI indicator heads south around 36, all of which supports some further declines. In the 4 hours chart, the price continues developing far below its moving averages, while the RSI heads modestly lower within oversold territory, also pointing to a bearish extension. The key support comes at 112.60, the 23.6% retracement of the post-Brexit slump.

Support levels: 112.95 112.60 112.30

Resistance levels: 113.45 113.90 114.40

GBP/USD Current price: 1.3325

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The GBP/USD pair spent most of the day consolidating around its daily opening, recovering sharply after briefly declining below the 1.3300 level, down to 1.3284. The pair managed to extend its advance to a fresh weekly high of 1.3371 during the London morning, helped by the final UK Markit services PMI for July, showing that the sector contracted as expected, by 47.4. After the Brexit, no bad news are good news for the Pound. This Thursday, the BOE will have its economic policy meeting, largely expected to cut rates by 25bps to new record lows of 0.25%. It's still unclear, however, if Governor Carney will dare to announce more bold measures, or leave doors open for additional stimulus. He may even announce that the MPC needs more data before making a decision. Anyway, its granted that the market won't lack entertainment coming from the Central Bank this time. As usual, the tougher the measures, the higher the chances of a Pound's slump. Technically, the 4 hours chart presents a modestly bullish bias, with the price above a bullish 20 SMA and indicators heading slightly higher above their mid-lines, albeit with limited upward momentum. In the case of a bullish scenario, the pair can rally up to 1.3480, July 15th high, with the opposite case favoring a decline down to the 1.3000 psychological support.

Support levels: 1.3285 1.3250 1.3200

Resistance levels: 1.3365 1.3400 1.3440

USD/JPY Current price: 101.23

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Japanese yen's strength persisted all through this Wednesday, with the USD/JPY consolidating its latest losses a handful of pips above the 101.00 mark. A sharp decline in Asian shares, and European ones trading in the red for most of the day, kept the yen strong, in spite of the usual jawboning coming from Japanese authorities. Vice Finance Minister Asakawa expressed its concerns over "one-sided" and "speculative" movements in the FX market, but given that the BOJ refrained from acting last week, markets are hardly concerned. The pair posted a daily high of 101.56, but retreated to end the day around 101.20, still looking vulnerable towards the downside in the short term, as in the 1 hour chart, the 100 and 200 SMAs have extended their declines, well above the current level, whilst the technical indicators have turned modestly lower around their mid-lines. In the 4 hours chart, the price is well below its moving averages, whilst the technical indicators have barely corrected oversold readings, holding within negative territory. 100.60 stands for the 50% retracement of the 75.56/125.85 yearly rally between October 2011 and June 2015, a line in the sand for the pair, given that steady losses below it should see the decline extending further in the longer run.

Support levels: 100.95 100.60 100.25

Resistance levels: 101.40 101.85 102.20

AUD/USD Current price: 0.7580

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The Australian dollar eased against its American rival, undermined by falling oil prices, and mixed Chinese data. The Chinese Caixin  Services PMI for July came in at 51.7, down from a 11-month high of 52.7 in June, although the Composite figure rose from 50.3 to 51.9 the fastest rate of growth since September 2014. The AUD/USD pair fell down to 0.7568, spending most of the day consolidating below the 0.7600 level, with the downward risk still seem moderate. In the 1 hour chart, the price is developing below a bearish 20 SMA, while the technical indicators hold below their mid-lines, with no certain directional strength. In the 4 hours chart, however, the price is hovering around a still bullish 20 SMA, the Momentum indicator heads north within positive territory, while the RSI stands around 54, favoring a recovery, particularly on an advance above 0.7610, the immediate resistance.    

Support levels: 0.7550 0.7510 0.7470

Resistance levels: 0.7610 0.7640 0.7675