EUR/USD: dull Monday, RBA to kick start the week

EUR/USD Current price: 1.1168

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The EUR/USD pair spent this Monday consolidating in a tight range 30 pips range, not far from the 5-week high set last Friday at 1.1197. The American dollar suffered a setback from worse-than-expected Q2 GDP, cooling down hopes for a US rate hike this year. Nevertheless, FED´s Dudley said that the market shouldn't rule out the possibility of an interest rate hike this year, in a banking conference in Indonesia. Market did not react to the announcement, as the focus this week is in two major Central Banks, the RBA this Tuesday, and the BOE on Thursday, both expected to loosen their economic policies, while the US will release its monthly employment report next Friday.

In the data front, European final July Markit manufacturing PMIs beat initial estimates, with the EU reading coming in at 52.0 down from June’s six-month high of 52.8. In Germany, the figure resulted at 53.8, signaling a steady pace of growth in the region. US data was not that encouraging, given that the ISM Manufacturing index fell modestly, down to 52.6 from previous 53.0 in June, while construction spending shrunk by 0.6%. The Markit Manufacturing PMI accelerated to an eight-month high, matching preliminary readings a 52.9.

Ending the day barely 10 pips away from Friday's close, the EUR/USD pair has met short term buying interest in the 1.1150 on intraday slides, making of the level the initial intraday support. Despite the price needs to accelerate beyond the 1.1200 level to be able to rally, technical readings in  the 4 hours chart supports an upward continuation, as the 20 SMA maintains a sharp bullish slope after surpassing the 100 and 200 SMAs, whilst the indicators have partially corrected extreme overbought readings and turned flat well above their mid-lines. The pair has a short term resistance in the 1.1230/40 region, with scope to extend up to 1.1280 after breaking above it, a daily descendant trend line coming from 1.1615.

Support levels: 1.1150 1.1120 1.1080

Resistance levels: 1.1200 1.1235 1.1280

EUR/JPY Current price: 114.25

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The Japanese yen hold on to its recent strength against all of its major rivals, with little clues coming from stocks, as worldwide stocks closed mixed around their daily openings. Japan will release its July Consumer Confidence index this July, and the Minutes of the latest meeting early Wednesday, but most of the attention will focus on Abe's fiscal stimulus policies, expected to be unveiled sometime this week. The EUR/JPY pair edged modestly higher, ending the day around 114.25, still trading around the 38.2% retracement of the post-Brexit slump. Short term, the 1 hour chart shows that the price remains well below its 100 and 200 SMAs, whilst the technical indicators consolidate within bearish territory, maintaining the risk towards the downside. In the 4 hours chart, the Momentum indicator lacks directional strength, but remains below its 100 level, while the RSI indicator has turned lower around 37, having barely corrected oversold readings, also supporting a bearish extension ahead. A break below 113.70, however, is required to confirm such move that can extend down to the 112.65 price zone.

Support levels: 113.70 113.20 112.65

Resistance levels: 114.40 114.85 115.30

GBP/USD Current price: 1.3194

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The British Pound out-stood for its weakness, falling down to 1.3162 against the greenback after the release of the final UK Markit manufacturing PMI, worst than initially estimated. The manufacturing sector in the kingdom sunk at the beginning of the third quarter, coming in at 48.2 in July down from 52.4 in June, the lowest since February 2013. Adding to Sterling's bearish case is the upcoming Bank of England economic policy decision. Mostly, the market is expecting a 25bps rate cut to 0.25%, which at this point has been fully priced in. If Governor Carney announces a larger rate cut, or a large extension of the APP program, Pound's reaction could be more significant.  The pair has struggled to regain the 1.3200 level for most of the day, having been unable to maintain gains on spikes beyond it, which suggests mounting bearish pressure. In the 1 hour chart, the price is being capped by a bearish 20 SMA, while the technical indicators head modestly lower within negative territory, also supporting a downward move. In the 4 hours chart, and given the tight intraday range the pair presents since early July, technical readings maintain a neutral stance, with the price still hovering around a modestly bullish 20 SMA, but indicators heading lower within neutral territory.  

Support levels: 1.3160 1.3120 1.3070  

Resistance levels: 1.3230 1.3270 1.3320

USD/JPY Current price: 102.33

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The UDS/JPY bounced modestly at the beginning of the day, rising up to 102.68 before settling around 102.30. Japanese Prime Minister, Shinzo Abe, is expected to announce the details of the ¥28T stimulus package, aimed to bolster the local economy sometime this week, but seems unlikely the news will be enough now to reverse yen's strength, as Abe hinted much of such stimulus package in a speech last week. The pair has been mostly consolidating its latest losses, below a major static resistance, the 61.8% retracement of its latest daily advance at 102.85. The bearish pressure may ease on a recovery beyond this level, but in the meantime, the bias is towards the downside. In the 1 hour chart, the price remains well below a bearish 100 SMA, currently around 104.10, while the technical indicators have recovered from oversold readings, but faltered below their mid-lines and turned back lower, suggesting inexistent buying interest at the time being. In the 4 hours chart, the technical indicators have also resumed their declines near oversold levels, whilst the price is well below its 100 and 200 SMAs, also supporting a downward extension on a break below 102.00.

Support levels: 102.00 101.60 101.20

Resistance levels: 102.85 103.15 13.50

AUD/USD Current price: 0.7564

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The AUD/USD pair was unable to hold to the 0.7600 level and fell down to 0.7550, ending the day nearby, weighed by oil prices, which fell to fresh lows, with WTI futures below $40.00 a barrel for the first time since mid April. The Reserve Bank of Australia is having its economic policy meeting during the upcoming Asian session, and market is expecting a rate cut, down to 1.5% from current 1.75%, although generally speaking, it´s seems that the Central Bank is in no rush to cut rates, particularly after Q2 inflation figures came in better-than-expected. A 25bps rate cut may have a limited impact, but will weigh on the Aussie anyway. Short term, the 1 hour chart shows that the technical indicators maintain strong bearish slopes well below their mid-lines, whilst the 20 SMA turned sharply lower above the current level, now offering a strong dynamic resistance around 0.7580. In the 4 hours chart, however, the intraday decline seems barely corrective, as the price holds above a bullish 20 SMA, whilst the technical indicators are currently bouncing from their mid-lines, suggesting that only a downward acceleration below 0.7550 will open the door for further slides.

Support levels: 0.7550 0.7510 0.7470

Resistance levels: 0.7580 0.7615 0.7640