EUR/USD: Recovery over, back under pressure

EUR/USD

The euro failed to hold above relevant technical levels against the US dollar during the New York session. The decline pushed the price below and short-term uptrend line and the 1.1100 - 1.1080 support zone. A consolidation around current price could open the doors for more declines, with targets at 1.1020 (June 30 low) and then 1.0970 (June 28 low); below there, 1.0900/1.0920 would be exposed.

In the short-term the bearish bias is clear, with the 4 hours chart showing price below the 20 SMA, the Momentum indicator breaking under the 100 line and the RSI moving south toward the 30 level. However, a phase of consolidation could be expected before another leg lower. If the euro recovers and climbs back above 1.1160, it could regain strength and clear the way for a test of 1.1180. On a wider perspective the euro appears to be setting up a test of post-UK referendum lows if it remains under 1.1100 as after being unable to rise above the region between 1.1160 - 1.1200, a correction seems more likely. 

On Wednesday the FOMC minutes will be released, but considering the meeting took place before the UK referendum, its impact could be limited.

Support levels: 1.1070 1.1020 1.0970

Resistance levels: 1.1120 1.1160 1.1210

 

USD/JPY

The yen gained momentum across the board during Tuesday's American session and outperform the US dollar, amid falling US government bond yields and a decline in stocks. The US 10-year yield reached a new all-time low.

The USD/JPY pair posted the lowest daily close in almost two years and erased all the post-referendum gains. In the short term, technical indicators show extreme readings and some signal of exhaustion suggesting some consolidation before breaking another support. On a wider perspective, trend, moving averages and most indicators point to the downside; a break under 101.40 would expose 101.00 first and then the psychological 100.00 level. 

Short-term, if the US dollar rises back above 102.30/40, it could gain support for a more pronounced recovery. As price approaches 100.00, speculations about a potential intervention from Japanese authorities to curb yen's strength could impact on the pair and a direct intervention would have an even larger effect, but not clearly  perdurable. 

From a fundamental perspective, the FOMC minutes that will be released on Wednesday could give the US dollar push to the upside and later during the week, the key event will be employment data from the US.

Support levels: 101.40 100.50 100.00

Resistance levels: 101.80 102.40 102.80

 

AUD/USD

The US dollar rose against commodity currencies on Tuesday particularly during the American session amid risk aversion. The Aussie faced mild pressure after the Reserve Bank of Australia left interest rates unchanged and introduced a soft easing tone. 

The AUD/USD pair moved with a bearish bias all day and bottomed out slightly above 0.7450 during the New York session. Price is back at the level it closed last week as it remains unable to hold above 0.7500. 

Technically, the daily chart still shows a bullish bias but the RSI is turning south and so it is the  Momentum indicator although it still remains above the 100 line. The key support could be found around 0.7430/50 that contained the decline during the last sessions and also where the 20 DMA stands. A close below could signal a deeper downward correction. In order to regain strength, the Aussie needs to rise back above 0.7500. 

From a wider perspective, a key resistance is seen at 0.7700, where the 100-week SMA and a long term downtrend line currently stand. In the short term, the 4 hours chart shows a downside bias, suggesting persistent pressure for the pair for the coming hours, with a potential bearish acceleration below 0.7435.

Support levels: 0.7440 0.7400  0.7370

Resistance levels: 0.7505 0.7545 0.7600 

 

GBP/USD

The GBP/USD pair dropped to historic levels on Tuesday after a quiet start of the week. The pound came under renewed pressure following the release of the Bank of England’s Financial Stability Report where Governor Mark Carney showed more worries about the economy and the financial outlook for the UK. Next week, for the first time in years, the meeting of the Monetary Policy Committee will be an event to watch closely with potential large implications.

GBP/USD fell to a new 31-year low of 1.2999, before bouncing modestly to the upside. However, the recovery was limited and the 1.3000 area still remains under pressure as even though technical indicators show extreme readings, price action appears to be strong. The 1.3000 is a relevant psychological level to watch and key for the next hours. A break below could unleash volatility across financial markets. 

The bearish pressure could ease if the pair manages to rise above 1.3210, where the 20-SMA in the 4-hour chart stands. Any rally below that level could look like a normal corrective move. 

Support levels: 1.3000 1.2940 1.2850 

Resistance levels: 1.3110 1.3200 1.3350