Geopolitical tensions continue, G10 ranged

Market Brief

The geopolitical tensions in Israel/Gaza and Ukraine/Russia continue occupying the headlines. The UN Security Council called for immediate end of conflict in Gaza. The gold remains in demand; XAU/USD holds ground above $1,300 with most investors thinking it is not the right time to play short. Another critical resistance stand at $1,285/86 (June 16th high/200-dma).

In Japan, USD/JPY and JPY crosses traded soggy as Nikkei was closed. USD/JPY traded in the tight range of 101.20/39. Trend and momentum indicators remain marginally bearish. Support is seen pre-101.00, then 100.76 (2014 low). Decent option barriers are eyed at 101.50 up to 102.00. EUR/JPY tests 136.75 (Fibonacci 38.2%% on Nov-Dec’14 rally). The key support zone is placed at 136.00/23 (March-July downtrend channel bottom/2014 low).

EUR/USD made a bullish start to the week after trading down to 1.3491 in New York last Friday. The pair broke below 1.3503 for the first time since June 5th ECB meeting; bids at 1.3477/1.3503 lifted the pair to 1.3524 before the closing bell. Trend and momentum indicators remain comfortably bearish; with July 15th CFTC data confirming the extension of speculative short EUR positions. Resistance is seen solid at 1.3550/1.3600. EUR/GBP corrects last week weakness (down to 0.78888); we remain sellers on rallies as long as resistance at 21-dma (0.79564) holds.

The Cable is in the bearish consolidation zone, deeper correction is eyed with technicals pointing downwards. Option bids are seen above 1.7075, offers dominate below 1.7050 (30-day mid-Bollinger band). The critical support zone stands at 1.6875/1.6950 (year-to-date uptrend bottom/50-dma).

NZD/USD traded back to 0.8720 (July 17th high) on thin volumes. The RBNZ verdict is due on July 24th, markets expect additional 25 bp hike. However the speculations on less hawkish accompanying statement keep the appetite limited. AUD/USD tests 0.9400 resistance, option bets for today expiry are mixed at this area, offers are solid pre -0.9505 (year-to-date high).

Released on Friday, the Canadian inflation accelerated at the faster pace of 2.4% year-to-June (vs. 2.3% expected & last). The faster growing consumer prices revived BoC-hawks, questioning how true Poloz’s lower inflation outlook is. USD/CAD sold-off to 1.0721 as knee-jerk reaction, resistance should now strengthen pre- 1.0800/20 region (optionality/200-dma) and keep the Loonie ranged within 1.0550/1.0800 band.

The economic calendar of the day is light, traders watch German June PPI m/m & y/y, Swiss June M3 Money Supply, Italian May Industrial Sales and Orders m/m & y/y and Chicago Fed June National Activity Index.