EUR/USD: high yielders run, EUR still lags

EUR/USD Current price: 1.1070

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Despite risk sentiment continued to improve, the common currency was unable to gain ground, ending the day merely 20 pips higher in the 1.1070 region. Stocks skyrocketed, with Wall Street hitting fresh record highs, the JPY plummeted amid speculation Abe will announce a new round of fiscal and monetary stimulus, whilst the Pound advanced two big figures, on a first glimpse of political certainty in the UK.

In Europe, data came from Germany, with consumer prices in the country up by 0.3% in June compared to a year later, modestly higher for a second consecutive month. Monthly basis, inflation rose by 0.1% in line with market's expectations, and hardly signaling an improvement in the country. In the US, the Index of Small Business Optimism increased 0.7 points to 94.5, still well below the 40 year average of 98, but the third monthly gain in a row, whilst JOLTS job openings fell in May, resulting in 5.5 million, down from 5.79 million in April.

The EUR/USD pair advanced up to 1.1125 early London, fueled by market's positive mood, but was unable to sustain gains above the 1.1100 figure, quickly retreating below it. The common currency faltered amid little confidence in the European economic health, as off lately, data has been quite disappointing pointing for  a continued slowdown. Technically, the 4 hours chart shows that the rally stalled right below a bearish 100 SMA, and now holds a few pips above a horizontal 20 SMA, whilst the technical indicators continue to lack directional strength around their mid-lines.  The risk remains towards the downside, although a clear break below the 1.1000 figure is required to confirm further declines, with speculative interest then, looking to retest post-Brexit lows around 1.0910.

Support levels:  11050 1.1000 1.0960

Resistance levels: 1.1125 1.1155 1.1190

EUR/JPY Current price: 116.06

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Yen's weakness pushed the EUR/JPY sharply higher, despite lackluster demand for the common currency, with the pair roughly 500 pips higher ever since the week started. Speculation that the BOJ will embark on more aggressive easing after Abe's landslide victory during the weekend elections, added to the return of risk appetite. The pair is extremely overbought in the short term, as in the 1 hour chart, the technical indicators are barely retreating from extreme readings, whilst the price is now over 300 pips above its 200 SMA, and 400 away from the 100 SMA, but there are no signs that suggest that the pair will turn lower, even in correction mode. In the 4 hours chart, technical indicators keep heading north within extreme overbought levels, whilst the price has overcome the 50% retracement of its post-Brexit slump, at 115.70 now the immediate support, with scope to extend up to the 117.30 region, the 61.8% retracement of the same decline.

Support levels: 115.70 115.25 114.80

Resistance levels: 116.40 116.85 117.30

GBP/USD Current price: 1.3161

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The Pound staged an impressive recovery ever since the  announcement that Theresa May will become UK’s new Prime Minister this Wednesday, with the GBP/USD advancing up to 1.3294, its higher in over a week, to settle a few pips below it by the end of the US session. The new Conservative Leader has emphasized that she will honor the decision of leaving the EU,  bringing some relief to markets, as investors were seeing that the UK government had no plan for a Brexit victory, and that the referendum took them to a political limbo. All eyes are now on the upcoming BOE's meeting next Thursday, and a 25bps seems to be already priced in, although further easing remains on the table, and may result in more Pound woes. In the meantime, the short term technical picture shows that the pair may now correct lower, as in the 1 hour chart, technical indicators are retreating within overbought territory, although the 20 SMA heads sharply higher well below the current level, limiting chances of a sharper decline. In the 4 hours chart, the Momentum indicator heads higher above its 100 level, whilst the RSI maintains its bullish slope around 71, as the price extends above a mild bullish 20 SMA, all of which supports some further advances, at least  up to 1.3340, a strong static resistance level.

Support levels: 1.3220 1.3170 1.3130

Resistance levels: 1.3295 1.3340 1.3385

USD/JPY Current price: 104.89

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The USD/JPY pair advanced up to 104.98, its highest since June 24th, rallying for a second consecutive day as BOJ Governor Kuroda and Prime Minster Abe are encouraging speculation that the Central Bank is ready to launch a more aggressive form of easing in the nearest term, after the weekend elections' result. Further pressuring the Japanese currency were stocks, steadily advancing all around the world and with US indexes reaching all-time highs. The pair added over 400 pips during the last two days, resulting in short term technical readings now standing in extreme overbought territory. Nevertheless, and according to the 1 hour chart, the upside is still favored, as the Momentum indicator turned modestly higher within its highs, whilst the RSI indicator holds around 80. In the 4 hours chart, the technical indicators maintain their bullish slopes barely easing their upward strength, whilst the price stalled right around the 200 SMA, testing the moving average for the first time since early June. The risk remains towards the upside, and a break above 105.40 should confirm a continued advance for this Wednesday, with scope to extend up to 106.80, the pre-Brexit high.

Support levels: 104.35 103.90 103.50

Resistance levels: 105.00 105.40 105.90

AUD/USD Current price: 0.7640

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The Aussie continues to outperform its major rivals, up to 0.7657 against the greenback, being the first to trim all of the post-Brexit losses. The AUD/USD pair was developing within an ascendant channel ever since assessing the initial impact and dropping down to 0.7300, as rates differentials made of the antipodean currency an attractive buy in a negative  rates world.  The pair has breached the roof of the mentioned channel this Tuesday, and despite intraday technical readings show signs of upward exhaustion, the risk remains towards the upside, with an extension above the daily high, opening doors for a retest of the year high of 0.7834, yet at the same time, increasing the risk of an upcoming RBA rate cut. Technically, and according to the 4 hours chart, the pair can consolidate some, and even post a moderated decline towards the 0.7600 region without losing its upward potential, as the RSI indicator turned higher around overbought levels, whilst the 20 SMA advanced further below the current level, now standing around 0.7555, providing a strong dynamic support.

Support levels: 0.7600 0.7555 0.7510

Resistance levels: 0.7660 0.7710 0.7770