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EUR/USD: nothing new under the sun

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1004

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Wall Street turned closed in the red this Thursday, as investors´ hope of easy money coming from different fronts diminished, after ECB's Draghi left the economic policy unchanged, and on BOJ´s Kuroda comments against "helicopter money." Asian shares fell, while European ones also present moderate losses ahead of the US opening. Currencies are mostly clueless in this new scenario, except for the Pound, hit by poor local data.

The EUR/USD pair trades within a tight range around 1.1000, after the Markit flash composite for the region fell down to 52.9 for July, an 18-month low. German data beat expectations, with the composite PMI up to 55.3 from previous 54.4, reaching its highest for 2016. The US will release its manufacturing figures later today, expected modestly higher, and if that's the case, the dollar will likely end the week higher once again, on resurging hopes of a sooner US Federal Reserve rate hike.

Technically, the risk is towards the downside in the EUR/USD pair, as in the 1 hour chart, the price remains capped by a bearish 100 SMA, while the technical indicators have entered negative territory, maintaining strong downward slopes. The 20 SMA in the mentioned time frame is flat around 1.1020, providing an immediate short term resistance, ahead of a daily descendant trend line now around 1.1060. In the 4 hours chart, the price is hovering around a bearish 20 SMA, while the technical indicators diverge from each other within neutral territory, in line with the lack of directional strength seen during these last three weeks.

Support levels: 1.0960 1.0910 1.0840

Resistance levels: 1.1020 1.1060 1.1100

GBP/USD Current price: 1.3096

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The GBP/USD pair traded as high as 1.3290 early Europe, but sunk after the release of the Markit PMIs estimated for July, with the services and manufacturing sector falling into contraction. As an exception, Markit released flash readings from the UK, showing the sharpest decline since early 2009. The Services flash PMI fell down to 47.4, from previous 52.3, while the manufacturing sector contracted to 49.1. The pair fell down to 1.3084 and trades nearby ahead of the US opening, with a strong bearish tone in the short term, with an acceleration gap still unfilled after the news. The 1 hour chart shows that the technical indicators head lower despite being in oversold territory, while the 20 SMA is turning south around 1.3200, far above the current level. In the 4 hours chart, the price is below a modestly bearish 20 SMA, the Momentum indicator remains neutral, while the RSI indicator presents a bearish slope, standing now around 39, supporting some further declines as long as selling interest maintains the upside limited around 1.3130.

Support levels: 1.3065 1.3020 1.2980

Resistance levels: 1.3130 1.3165 1.3200

USD/JPY Current price: 106.16

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Holding mid-range, downside limited. The USD/JPY pair recovered modestly, despite the poor performance of worldwide stocks, trading a handful of cents above the 106.00 level ahead of the US opening. Short term, the pair presents a modest positive tone, given that in the 1 hour chart, technical indicators head higher around their mid-lines, although the price is being limited by its 100 SMA. In the 4 hours chart, technical indicators have turned flat around their mid-lines, maintaining a neutral stance, but the price remains well above its moving average, which indicates a limited downward potential. The main resistance comes at 106.60, with a break beyond it required to confirm a steeper recovery, although the most likely scenario is further consolidation ahead of BOJ's meeting next week.

Support levels: 105.80 105.40 105.05

Resistance levels: 106.60 107.10 107.50

AUD/USD Current price: 0.7481

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The AUD/USD pair trades below the 0.7500 level, having eased during the Asian session amid speculation the RBA will cut rates further in the upcoming months. Also, Australian 3 year bond futures traded at a record low yield of 1.39 %, while the 10-year bond yield fell down towards 1.88% vs. 1.98% previous. The pair, however, recovered from a daily low of 0.7460, trading with a limited short term upward scope, according to technical readings. In the 1 hour chart, the price is being capped by a bearish 20 SMA, while the technical indicators maintain their bearish slopes within negative territory. In the 4 hours chart, the price is developing below its 20 SMA and 200 EMA, both converging 0.7490, while the technical indicators aim higher, but within negative territory.

Support levels: 0.7450 0.7410 0.7370

Resistance levels: 0.7490 0.7540 0.7590

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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