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The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.11461
Open: 1.11238
% chg. over the last day: -0.18
Day's range: 1.11203– 1.11389
52 wk range: 1.1111 - 1.2009

Last week, USD strengthened against a basket of world currencies. The dollar index (#DX) updated the two-month highs and closed in the green . The USD was supported by a number of optimistic economic releases from the USA. The ECB, as expected, kept the main parameters of monetary policy at the same level. The head of the Central Bank, Mario Draghi, said interest rates would remain at or below the level until at least the end of the first half of 2020. Financial market participants expect the Fed meeting, as well as a report on the US labor market in July. At the moment, EUR/USD quotes are consolidating in the range of 1.11150-1.11450. Positions must be opened from these marks.

The Economic News Feed for 29.07.2019 is calm.

Indicators point to the strength of sellers: the price has fixed below 50 MA and 100 MA.

The MACD histogram is in the negative zone and continues to decline, which signals a bearish mood.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which also sends a signal to sell EUR/USD.

Trading recommendations

Support levels: 1.11150, 1.11000
Resistance levels: 1.11450, 1.11850, 1.12100

If the price consolidates below the level of 1.11150, the price will fall toward 1.10800-1.10600.

Alternatively, the price will rise toward 1.11700-1.11900.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.24828
Open: 1.24440
% chg. over the last day: -0.24
Day's range: 1.24257 - 1.24596
52 wk range: 1.2397 - 1.3385

The bearish mood prevails on the GBP/USD currency pair. During yesterday's and today's trading, the drop in quotes exceeded 50 points. The pound has updated local lows. At the moment, the key range is 1.24200-1.24550. GBP/USD quotes have the potential to further decline. Investors are concerned about the “tough” Brexit scenario. Today, financial market participants will evaluate the US GDP report. We recommend to open positions from key levels.

The Economic News Feed for 29.07.2019 is calm.

Indicators do not give accurate signals: 50 MA crossed 100 MA.

The MACD histogram is in the negative zone and continues to decline, indicating a drop in GBP/USD quotes.

The Stochastic Oscillator is in the oversold zone, the %K line crossed the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.24200, 1.23850
Resistance levels: 1.24550, 1.24900, 1.25200

If the price consolidates below 1.24200, the price will fall toward 1.23850-1.23600.

Alternatively, the quotes will grow toward 1.24800-1.25000.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.31395
Open: 1.31556
% chg. over the last day: +0.14
Day's range: 1.31528 - 1.31683
52 wk range: 1.2727 - 1.3664

The USD/CAD currency pair has once again shifted to growth. CAD updated local maxima. At the moment, the USD/CAD quotes are consolidating near the resistance level of 1.31700. Mark 1.31450 is already a “mirror” support. Trading instrument has the potential for further growth. Financial market participants expect a report on US GDP. We also recommend to pay attention to the dynamics of oil prices. Positions must be opened from key levels.

The Economic News Feed for 29.07.2019 is calm.

Indicators point to the strength of buyers: the price has fixed above 50 MA and 100 MA.

The MACD histogram is in the positive zone and continues to rise, which signals a further increase in the USD/CAD quotes.

The Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which also indicates bullish moods.

Trading recommendations

Support levels: 1.31450, 1.31200, 1.30950
Resistance levels: 1.31700, 1.32000

If the price consolidates above the level of 1.31700, the price will grow toward 1.32000-1.32200.

Alternatively, the price will drop toward 1.31200-1.31000.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 108.648
Open: 108.629
% chg. over the last day: -0.03
Day's range: 108.419 – 108.686
52 wk range: 104.97 – 114.56

USD/JPY stabilized after a significant increase last week. At the moment, the trading instrument is consolidating. Unidirectional trend is not observed. The key support and resistance levels are 108.450 and 108.750, respectively. USD / JPY quotes have the potential for further growth. We recommend to pay attention to the dynamics of the yield of US government securities. Positions must be opened from key levels.

The Economic News Feed for 29.07.2019 is calm.

The price fixed above 50 MA and 100 MA which points to the power of the buyers.

The MACD histogram is above 0. There are no signals.

The Stochastic Oscillator is in the neutral zone, the %K line is above the %D line which gives a signal to buy USD/JPY.

Trading recommendations

Support levels: 108.450, 108.250, 108.000
Resistance levels: 108.750, 109.000

If the price fixed above 108.750, expect further growth toward 109.000-109.200.

Alternatively, the price will descend toward 108.250-108.100.

The EUR/USD has formed a big shooting star at the confirmed downtrend so we should see a continuation of a bearish move

The first POC zone is 1.1135-1.1145 based on a big shooting star rejection. If the price makes a 4h close below 1.1110 we should see a continuation towards 1.1080 and 1.1050. However a bounce above 1.1175 and the pair will see another POC zone. POC2 1.1190-1.1210 is the last line of defence for bears as the price should reject from the zone targeting 1.1175, 1.1145 and finally 1.1110 again. This week is FOMC decision and the price might be waiting for the event in order to make a full swing and decide on the next move.

On Wednesday 31 July the Federal Reserve may cut interest rates for the first time in over a decade, marking a significant reversal in policy from the tightening cycle that was first pursued by former Fed Chair Janet Yellen. While a rate cut seems like a done deal, markets are still puzzled about the scale of the cut.

As of today, investors forecast a 79% probability of a 25 basis points cut and a 21% likelihood of a larger 50 basis points cut according to CME Fedwatch Tool. Several economic data releases have shown a weakening of the US economy, but there's still no apparent sign of a recession. While the US economic growth slowed to 2.1% in the second quarter compared to 3.1% in the first quarter, consumer spending remained strong, showing that Americans are not yet concerned about the impact of trade tariffs and slowing global economic growth. However, businesses have been curtailing their investments and if this becomes a trend, consumer confidence will eventually decline, leading to less spending in the future.

Overall, it doesn't seem like there's an urgency for a 50-basis point rate cut at this stage. It may even send the wrong signal if the Federal Reserve cuts rates aggressively. A large rate cut may indicate the Fed knows something others don't, which will likely have negative consequences on asset prices and the US Dollar. Our base case scenario is to see a 25-basis point rate cut on Wednesday with further easing if economic data deteriorates further.

The Fed is not the only central bank aiming to ease monetary policy. This week we're likely to see a shift from the Bank of England and Bank of Japan towards the same direction.

Trade talks to resume

Trade talks are finally back on the table. US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will kick off a new round of negotiations with their Chinese counterparty Vice Premier Liu He on Tuesday. Both parties know they are running out of time to prevent a sharper slowdown in the global economy, however, given the past experiences, investor sentiment isn't too high. While resolving their core issues seems far from reach at this stage especially when it comes to China's subsidies and technology transfers, markets need at least a sign of goodwill to prevent a sharp volatile reaction in financial markets.

Earnings and Economic data

The S&P 500 and Nasdaq Composite closed at record highs last week in the wake of better-than- expected earnings from tech giant Alphabet. It seems that equity markets are still enjoying the euphoria from last week's earnings reports and the possible upcoming Fed rate cut, and that's likely to continue if earnings do not disappoint this week. One-third of the S&P 500 companies are due to announce results this week and Apple is likely to attract most of the attention, especially when it comes to iPhone sales.

On the data front, the US jobs report will be under the investors' radar, but given that it will be released after the FOMC policy announcement, it will have less of an impact on equities and FX markets. However, data released this week will be a good indicator of future Fed policy.

EURUSD is struggling to gain buying interest after the deep fall towards the key 1.1100 support mark – the lowest in more than two years.

The negative momentum in the MACD, which is far below the zero and trigger lines, suggests that the bearish sentiment is likely to stay in the short-term. Yet in the very short-term, upside corrections cannot be ruled out as the fast stochastics have already posted a bullish cross in oversold zone, while the price itself has been repeatedly testing the lower Bollinger band over the past week, calling for a rebound as well.

On the way up, the bulls could initially pause around the 1.1180 barrier before hitting the middle Bollinger band at 1.1216. Higher and above the 50-day simple moving average (SMA), the price could surpass its previous peaks around 1.1283 to improve buying appetite towards the 1.1320 level.

In the negative scenario, where the price violates the floor around 1.1100, the next key support could be detected somewhere between 1.1000-1.0950. Such a selloff would also reactivate the long downtrend started from the 1.2554 top early in 2018, turning EURUSD strongly bearish in the bigger picture.

All in all, EURUSD maintains a negative status, with the odds for a price reversal in the very-short-term rising higher.

The British pound has opened the week on the back foot against the greenback after a heavily bearish price close below its former yearly trading low. The 1.2350 level offers the most significant technical support for the GBPUSD pair below the 1.2380 level. Bulls have major work ahead to move the GBPUSD pair back the 1.2525 resistance level to shift the bearish weekly bias.

The GBPUSD pair is only bullish while trading above the 1.2525 level, key resistance is located at the 1.2570 and 1.2610 levels.

If the GBPUSD pair trades below the 1.2400 level, key support is found at the 1.2350 and 1.2310 levels.

The euro has started the new trading week slightly firmer against the US dollar as bulls continue to defend the current yearly trading low. If bulls continue to defend the 1.1100 support level the EURUSD pair could eventually reverse back towards the 1.1215 area. A move under the 1.1100 level should see the EURUSD pair performing a bearish breakout towards the 1.1050 level

The EURUSD pair is heavily bearish while trading below the 1.1160 level, key support is found at the 1.1100 and 1.1050 levels.

If the EURUSD pair trades above the 1.1160 level, bulls could test back towards the 1.1185 and 1.1215 levels.

Bitcoin is starting to turn more bearish on the daily time frame after a series of bearish price closes below the BTCUSD pair’s former monthly trading low. A breakout below the $9,100 level exposes the BTCUSD pair to further losses towards at last the $8,400 level. Bulls need to move price above the $10,750 resistance level to encourage another attack towards the $11,100 level.

The BTCUSD pair is only bullish while trading above the $10,750 level, key resistance is located at the $11,100 and $11,500 levels.

If the BTCUSD pair trades under the $10,000 level, sellers may test towards the $9,100 and $8,400 support levels.

Sterling continued to decline amid the likelihood of a no-deal Brexit. The British currency is trading at the lowest level since March 27. Over the weekend, it was announced that the Chancellor of the Exchequer was preparing to release GBP 1 billion to help the country prepare for a no-deal Brexit, which he called a “very real prospect”. At the same time, Tory members of Parliament opposing a no-deal Brexit are stepping up their preparations to try and prevent the country from exiting without a deal.

Asian stocks moved slightly lower ahead of what will be the busiest week for global markets. On Wednesday, the Federal Reserve is expected to make a pivotal interest rates cut in response to the challenging state of the global economy. On Friday, data from the US showed that the economy expanded by 2.1%, which was below the 3.2% recorded in the previous quarter. Two days after the Fed makes its interest rates decision, the Labor Department will release employment data for the month of July.

Today, the market received retail sales data from Japan. The numbers showed that the retail sales rose by 0.5% in June, which was lower than the previous month’s 1.3%. Later today, the market will receive the house price index in the United Kingdom. They will also receive the BOE consumer credit data, mortgage approvals and mortgage lending. From Spain, they will receive the consumer price index while from Italy, they will receive the PPI.

GBP/USD

The GBP/USD pair declined to a low of 1.2368, which is the lowest level since March 2017. On the daily chart, this price is below the 21-day and 42-day moving averages while the RSI has moved to a low of 21. The price is along the lower line of the Bollinger Bands while the stochastic indicator is in the oversold level. The pair will likely continue moving lower ahead of the FOMC decision.

EUR/USD

The EUR/USD pair was little moved ahead of the busy market week. The pair is trading at 1.1130, which is a few pips above the lowest level since May this year. On the four-hour chart, the pair is trading below the 21-day and 42-day moving averages. The accumulation/distribution indicator has continued to move lower while the money flow index has moved slightly upwards. The pair will likely remain in this holding pattern ahead of the FOMC decision.

USD/JPY

The USD/JPY pair declined after Japan released its retail sales data. The pair reached a low of 108.40 and then moved slightly above to the current level of 108.50. On the hourly chart, the pair is trading along the 42-day moving averages and slightly lower than the 21-day EMA. The pair will likely remain along these levels ahead of the FOMC decision.

Markets

Global core bonds were little inspired last Friday. The German Bund developed in a choppy sideways pattern amid an empty EMU eco calendar and as markets pondered any ECB moves following the policy meeting on Thursday. Yield differences varied from +1 bp (2-yr) to -1.4 bps (10-yr). Peripheral spreads widened with Italy and Greece (both +6 bps) underperforming. The release of US Q2 GDP brought only a bit more excitement in the Treasury market. Growth did not slow down as much as expected, mainly on the back of strong private consumption. However, details were too "messy" for markets to draw any strong conclusions. The US yield curve flattened a little with yields advancing 1 bp at the short end (chances of a 50 bps cut by the Fed decreased marginally) while the 10-yr tenor declined 1.4 bps. This week's eco calendar is heavily back-loaded and eyes rather meagre today. We therefore expect no strong directional bond trading at the start of the week with US/Sino talks (tomorrow), the Fed policy decision, EMU GDP/CPI, Chinese PMI's (Wednesday), US manufacturing ISM (Thursday) and July payrolls (Friday) all looming the market. If anything, core bonds might hold to recent levels amid these uncertainties.

The dollar regained the upper hand on Friday. The post-ECB euro rebound had no strong legs. US Q2 growth was slightly stronger than expected at 2.1% QoQa. The report contained few elements for the Fed to cut its policy rate by more than 25 bp this week. The dollar gained few ticks, but didn't break important technical levels. EUIR/USD closed at 1.1128 (from 1.1147). USD/JPY gained only marginally (close at 108. 68). Late on Friday, there were several headlines on the US FX policy. White house advisor Kudlow said the US ruled out currency interventions, but said that president wanted a stable dollar and that he is concerned on other countries weakening their currency. This morning, the dollar hovers near recent highs, but still didn't break any key technical levels. Asian equities are mostly in the red despite WS major indices closing at record levels. There are few data in EMU and in the US today but the calendar is well filled later this week (cf supra), with the Fed policy decision in focus. A 25 bp preemptive rate cut is expected, but markets will try to find out how much Fed easing might be needed over the next quarters. The Fed will probably leave all options open, but might be reluctant the make concrete engagements as long as the US economy performs rather well. We don't expect radical changes in markets' anticipation on the additional easing further out. At the same time, any doubts on the pace of further easing might keep the dollar well supported. The test of the 1.1110/00 support area might continue going into the Fed meeting and a break is still possible.

Sterling further reversed a correction from earlier last week on Friday. The EU reiterated that it won't renegotiate the Brexit deal, raising the risk for a hard no deal Brexit. During the weekend, the new UK Cabinet reiterated that the UK will leave the EU on October 31 and that it is stepping up the efforts to be ready for a no-deal Brexit. This hard Brexit-rhetoric is putting sterling again under pressure. EUR/GBP is again nearing the 0.90 barrier. Today, the UK monetary data probably won't be key for sterling trading. Brexit headlines will dominate. Later this week, markets will keep a close yet at the BoE policy meeting and inflation report. Will the BoE change its path of modest expected rate hikes and give more weight to the impact of Brexit related uncertainty on the economy? Short-term, there is no trigger for a sustained sterling rebound. The UK currency remains in the defensive.

News Headlines

US/Sino trade talks are to resume this week but pessimism reigns for the moment. US president Trump suggested on Friday that China may not sign a deal until the 2020 election, hoping that would deliver a different president whom it could negotiate more favorable terms with.

Rating agency Fitch maintained South Africa's sovereign rating at BB+ but cut its outlook from stable to negative, citing a worrisome fiscal balance – related to the government's support of Eskom – and subdued economic growth due to the slow pace and limited scale of supportive measures.

Pivot (invalidation): 56.35

Our preference Short positions below 56.35 with targets at 55.70 & 55.35 in extension.

Alternative scenario Above 56.35 look for further upside with 56.70 & 57.00 as targets.

Comment The RSI is mixed to bearish.