EUR/USD edges higher, but gains limited

EUR/USD

The US dollar traded mixed across the board on Monday, while commodity currencies were among the best performers in the FX market.

European stocks ended broadly down, but the euro managed to post mild gains, extending its recovery from post-Brexit lows. EUR/USD continued to move with a bullish bias and it stabilized around 1.1150, having scored a daily peak of 1.1159 during the American session, although finding little follow-through beyond 1.1150. The pair needs to clear that area to extend the rally; a break would expose the 1.1200 - 1.1215 zone where 4 hours chart moving averages (100 and 200) are seen and also the 20 DMA. In the same time frame, price is being supported by the 20 SMA on the downside; a break below 1.1110 would favor a bearish correction. On the daily chart, a close below 1.1080 would add bearish pressure while to the upside a close above the 20 DMA at 1.1200 could see the pair achieving a more stable bullish tone.

Support levels: 1.1110 1.1070 1.1020

Resistance levels: 1.1175 1.1210 1.1235

GBP/USD

The GBP/USD pair remained steady all day, like most of the currencies, hovering around 1.3280. It spiked higher to 1.3340, but pulled back quickly, although it managed to hold above 1.3250 despite economic data. The UK construction PMI report for June showed the worst reading since the financial crisis and surprised market participants with a larger-than-expected decline from 51.2 to 46.0. UK referendum results have already started to affect the economy. The London stock index dropped 0.84% but it did not affect the pound. Technically, GBP/USD continues to show a bearish tone, with price below moving averages and consolidating near 31-year lows. Price has been able to hold above previous day's lows but so far, no relevant signals of a strong correction are seen. The 4 hours chart shows price under the 20 SMA that is pointing south. A consolidation below 1.3250 could increase the bearish tone while to the upside, on top of 1.3350 a positive signal for the Pound could emerge, with the price above the 20 SMA and Momentum breaking the 100 line from the downside.

Support levels: 1.3250 1.3205 1.3150

Resistance levels: 1.3340 1.3410 1.3490

USD/JPY

The USD/JPY pair moved in a range of less than 50 pips throughout the day. The observance of the Independence Day holiday  in the US reduced volume and favored a session with abnormal low volatility levels. With no new economic numbers, market participants could start to focus on Wednesday's FOMC minutes and Friday's NFP while in Japan the next economic report will be released on Thursday. Speculations about what the Bank of Japan could do at the next meeting (the first after the Brexit referendum) could have an impact on the yen. Bond yields remained practically unchanged, with the Japan 10-Y yield rising from -0.26% to -0.247%.Price remained steady around 102.70, unable to move significantly away from that level. The technical picture favors the downside for the next hours, with the daily chart showing the pair unable to rise above the 103.55 - 103.90 region that was a key support and where the 20 DMA stands. The dominant trend in the daily chart also continues to point to the downside and another sharp decline during the next hours could expose 101.35, the last strong barrier before 100.00. In the short term, the 4 hours chart shows a neutral to bearish tone, with the price below its moving averages and the Momentum indicator accelerating below 100.

Support levels: 102.40 101.95 101.35

Resistance levels: 102.80 103.55 104.00

AUD/USD

The US dollar dropped versus commodity currencies on Monday and pushed AUD/USD to the upside, with price approaching pre-UK referendum levels. The decline in European markets did not stop the pair that rose toward 0.7550. On Tuesday, the Reserve Bank of Australia (RBA) will decide on monetary policy. Market consensus points to the central bank leaving rates unchanged at 1.75% and the main risk is a rate cut that would weaken the Aussie in the market. Before the RBA decision, retail sales and trade data for May will be released. From a technical perspective the pair holds an upward tone, having shown strength today after overcoming a weak start of the day and then when it broke above 0.7500. It posted the second highest daily close since March and a test of the 0.7580 - 0.7600 region could be on the cards. Momentum in the daily chart looks even more bullish today with price moving away from the 20 DMA. A clear break of 0.7600 could trigger a bullish run to the next resistance area around 0.7670. In the shorter term, technical indicators point to the upside, but the RSI has flattened still below the 70 line but not yet pointing to the downside. A correction toward 0.7500 would not create strong damage, but if it extends below, the short term tone could start favoring the US dollar.

Support levels: 0.7500 0.7450 0.7400

Resistance levels: 0.7560 0.7600 0.7670