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In the Monday session, EUR/USD has edged lower, as the pair is trading at the 1.1730, down 0.15% on the day. On the release front, German Retail Sales climbed 1.1%, crushing the estimate of 0.1%. Eurozone CPI Flash Estimate remained unchanged at 1.3%, matching the forecast. In the US, today’s major event is Pending Home Sales. The markets are expecting a rebound of 0.9%, after three straight declines. On Tuesday, the US releases ISM Manufacturing PMI, with the markets expecting the index to dip to 56.4 points.

German indicators started the week on a positive note, as retail sales posted a strong gain of 1.1%. This marked the strongest gain since February. Last week, GfK German Consumer Climate strengthened for a fourth straight month, improving to 10.8 in the July report. This edged above the estimate of 10.7 points. Importantly, strong consumer confidence has translated into increased consumer spending, a key driver of economic growth. However, the fly in the ointment remains inflation, which is stuck at low levels. The lack of inflation is a pressing concern for ECB policymakers, and there is little chance that the bank will end its quantitative easing program before December, if inflation levels don’t move upwards.

It’s become an all-too-familiar pattern out of Washington – trouble for the White House has translated into losses for the US dollar, as higher political risk has led to investors moving away from the greenback in favor of other currencies and gold. It was déjà vu on Friday, as President’s struggling healthcare bill gasped its final breath as the bill was defeated in the Senate after three Republican lawmakers joined the Democrats and voted against the bill. This is another setback for President Trump, who has been unable to get Congress to pass any significant legislation, despite the Republicans controlling both the House and the Senate. Trump will now be able to focus on other issues such as tax reform, but investors are skeptical as to whether the President will have the support he needs in Congress to pass major legislation. The US dollar was broadly lower on Friday and the euro climbed to 1.7777, its highest level since January 2015.

Daily Pivots: (S1) 144.95; (P) 145.36; (R1) 145.73; More

Intraday bias in GBP/JPY remains neutral for the moment. On the upside, break of 147.76/148.42 key resistance zone will resume larger rebound from 122.36. On the downside, break of 144.01 will extend the sideway pattern from 148.20 with another fall back to 135.58/65 support zone.

In the bigger picture, rise from medium term bottom at 122.36 is expected to continue to 38.2% retracement of 196.85 to 122.36 at 150.43. Decisive break there will carry long term bullish implications and pave the way to 61.8% retracement at 167.78. In case the sideway pattern from 148.42 extends, we'd be looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside.

EUR/USD

Current level - 1.1742

The bias is bullish above 1.1716, for a rise towards 1.1870 area. An eventual slide below the latter will provoke another attempt at 1.1650.

USD/JPY

Current level - 110.54

The downtrend is intact, heading towards 109.30 support zone. Minor intraday resistance lies at 110.80, followed by the key area at 111.47.

GBP/USD

Current level - 1.3128

A violation of the previous high at 1.3157 will confirm, that the consolidation pattern is over and the pair will target 1.3260 mark.

Daily Pivots: (S1) 129.58; (P) 129.99; (R1) 130.43; More...

Intraday bias in EUR/JPY remains neutral as consolidation from 130.76 is extending. Another fall could be seen. But downside should be contained by 127.43 cluster support (38.2% retracement of 122.39 to 130.76 at 127.56) and bring rebound. Above 130.76 will extend the larger rally to next key fibonacci level at 134.20.

In the bigger picture, the down trend from 149.76 (2014 high) is completed at 109.03 (2016 low). Current rally from 109.03 should be at the same degree as the fall from 149.76 to 109.03. Further rise is expected to 61.8% retracement of 149.76 to 109.03 at 134.20. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. Medium term outlook will remain bullish as long as 124.08 resistance turned support holds.

July flash inflation numbers, as well as the June unemployment rate for the eurozone were released today. The positive surprise in core inflation, in conjunction with the fall in the unemployment rate, led to the euro recording gains relative to major currencies.

Looking at today's figures, the July flash inflation rate stood at 1.3% on an annual basis, as expected. This also coincided with the prior month's figure. Rising energy prices contributed the most to inflationary pressures during July. The respective number for core inflation, the measure that excludes volatile unprocessed food and energy items, was released at 1.3% year-on-year as well, outstripping expectations for 1.1% growth and coming in above June's 1.2%. This constitutes a four-year high for the measure that is often cited by the European Central Bank in its policy making.

Turning to June's unemployment rate, it edged down to 9.1%, its lowest since 2009, from May's downwardly revised 9.2% (from 9.3% before). Analysts' projections were for a reading of 9.2%. This multi-year low reaffirms that euro area economies remain within a path of stronger growth. Adding to this, Germany saw its unemployment rate falling to 3.8% from 3.9% in May. This raises hopes that the eurozone's largest economy will experience more significant wage rises leading to positive contagious effects for the entire euro area.

Regarding reaction in the forex markets, the euro advanced on the news relative to the dollar as euro/dollar rose to as high as 1.1744 within the first few minutes of data release. The pair previously traded at 1.1731. Euro/pound also gained, rising to the intra-day high of 0.8961 from 0.8953 before the numbers went public. Gains relative to both currencies were not sustained, though it is worthy of mention that the common currency has considerably advanced versus the US and British currencies since the start of the year. Year-to-date, euro/dollar is up 11.6% and euro/pound up 5.0%.

During its last meeting on July 20, the ECB maintained its accommodative monetary policy stance with Mario Draghi, the central bank's President, emphasizing the need to be patient in terms of policy normalization. Today's upbeat figures are sure to add to speculation that the ECB will soon start removing accommodation or at least more actively talk about such a shift in policy. The Bank next meets on September 7.

Daily Pivots: (S1) 0.8923; (P) 0.8946; (R1) 0.8964; More

Intraday bias in EUR/GBP remains neutral for the moment as consolidation from 0.8994 continues. In case of another retreat, downside should be contained by 0.8828 to bring rise resumption. Whole rally from 0.8312 is still in progress and break of 0.8994 will target 0.9304 key high. There is no clear sign of up trend resumption yet. Hence, we'll be cautious on strong resistance from 0.9304 to limit upside and bring another fall. However, break of 0.8828 will turn focus back to 0.8742 support. Break there will indicate near term reversal.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. It's uncertain whether it is finished yet. But in case of another fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound. Whole up trend from 0.6935 is expected to resume after consolidation from 0.9304 completes.

Daily Pivots: (S1) 1.4653; (P) 1.4701; (R1) 1.4754; More...

Intraday bias in EUR/AUD remains neutral for the moment. At this point, we're still favoring the case that correction from 1.5226 has completed with three waves down to 1.4421 already. Hence, another rally is expected. Break of 1.4777 will turn bias to the upside for 1.5073 resistance first. Break there will indicate resumption of whole rise from 1.3624. However, break of 1.4221 will invalidate our view and extend the decline from 1.5226 to 61.8% retracement of 1.3624 to 1.5226 at 1.4236.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term has completed at 1.3624. Rise from 1.3624 is expected to resume to retest 1.6587. The corrective structure of the fall from 1.5226 is affirming this view. Above 1.5226 will target a test on 1.6587 key resistance. However, another decline will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.

Daily Pivots: (S1) 1.1291; (P) 1.1349; (R1) 1.1436; More...

With 1.1304 minor support intact, intraday bias in EUR/CHF remains on the upside for the moment. Current rally is expected to l target 200% projection of 1.0652 to 1.0986 from 1.0830 at 1.1498 next. On the downside, below 1.1304 minor support will turn intraday bias neutral and bring consolidations, before staging another rise.

In the bigger picture, sustained break of 1.1198 key resistance confirms resumption of the long term rise from SNB spike low back in 2015. In this case, EUR/CHF would eventually head back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1087 resistance turned support holds.

Extension of last Friday's strong post-US data fall on Monday failed to clearly break below daily cloud base (110.38) at the first attempt. The pair hit session low at 110.30, but bounced higher, on consolidation ahead of renewed attempts lower.

Bids in the zone above 110.00 support keep the downside protected for now, with extended upticks, attracted by daily cloud twist later this week, expected to provide selling opportunities, as overall structure remains firmly bearish.

Sustained break below daily cloud and violation of 110.00 support, below which large stops are parked, would trigger fresh acceleration lower.

Extended upticks are expected to stay capped under daily cloud top at 111.23.

Res: 110.72, 111.00, 111.23, 111.36
Sup: 110.38, 110.14, 110.00, 109.26

Cable stands at the back foot in early Monday's trading and pressures initial support at 1.3100 after strong rally on Friday failed to regain last week's 1.3158 high (the heist since Sep 2016).

Deeper pullback signaled by bearish divergence on slow stochastic, as well as IMF report saying sterling is 15% overvalued.

Dips may test support at 1.3072 (Fibo 38.2% of 1.2932/1.3158 upleg) and extend to 1.3050 (50% retracement / daily Tenkan-sen / 10SMA) before broader bulls resume. Sustained break above 1.3158 to open round-figure barrier at 1.3200 and Fibo 138.2% projection at 1.3222.

Weekly close above 1.3109 (Fibo 38.2% of 1.5016/1.1930 fall) on Friday was a bullish signal for extension of recovery rally from post-Brexit lows at 1.2000 zone, where the base has been formed.

Res: 1.3134, 1.3158, 1.3200, 1.3222
Sup: 1.3100, 1.3072, 1.3050, 1.3018