FX trading quiet, eventful week ahead

Market Brief

The FX markets started the week in quiet fashion. We are heading into an eventful week with important releases on the economic calendar. In US, we will be closely monitoring the GDP 2Q first reading and the FOMC decision (Wed), the July nonfarm payrolls and the unemployment rate (Fri). In the Euro-zone, the Spanish 2Q preliminary GDP (Wed), the EZ composite CPI estimate for July, the unemployment rate (Thu) and July final PMI readings (Fri) will be key. In addition, the Japanese jobless rate (Tue), the industrial production (Wed) and the Canadian GDP update (Thu) should keep traders busy through this week.

The US 10-year yields remain below 2.50% despite supportive US durable goods data released on Friday while the DXY index advanced to 81.084, the highest levels since June 5th (date matching the ECB announcement for its additional stimulus package). Low US yields keep USD/JPY limited on the upside, solid resistance is seen at 101.90/102.10 area (including option barriers, 100 and 200-dma and daily Ichimoku cloud cover). EUR/JPY started the week in the tight range of 136.64/84. Technicals are flat, the key support stands at 136.23 (2014 low).

EUR/USD extended weakness to 1.3422 on Friday and made a quiet start to the week. The pair consolidated losses in Asia. The sentiment remains bearish, combined to upside USD potential this week (FOMC, NFPs). Bids are eyed at 1.3400+, while decent option related offers wait to be activated at 1.3400 for the week ahead. Resistance should come into play at 1.3550 (last week high). EUR/GBP trades comfortably in the mid-range of June-July downtrend band (0.78673/0.79633). The overall bias remains bearish as long as resistance at 0.79330/0.79633 (21-dma/downtrend channel top) holds.

The broad based USD appetite sent USD/CAD above 1.0821 last Friday. The pair consolidates gains in the bullish consolidation zone, above 1.0800. Bids build up at 1.0789/1.0800 (50-dma/optionality). The key resistance stands at 200-dma (1.0832).

The week starts with light economic calendar. Technicals are likely to drive the FX trading as traders adjust positions before important data due in the second half of the week. Today, the economic calendar consists of Italian July Business Confidence and Economic Sentiment, US July (Prelim) Services and Composite PMI, US June Pending Home Sales m/m & y/y and Dallas Fed Manufacturing Activity.