Sample Category Title

The common currency extended declines earlier today which saw price dropping to a five- week low. The declines in the EURUSD comes as the common currency is also impacted by the Brexit events. The UK is expected to announce Boris Johnson as the next Prime minister of the UK.

Will the EURUSD stabilize near the support?

The declines in the currency pair has sent the EURUSD to test the support level at 1.1188. Considering that this is a minor support, we could expect to see a possible breakdown lower. However, if a rebound off this support level occurs, then we could see a possible sideways pattern emerging. The EURUSD could trade flat within 1.1250 and 1.1185 levels in the short term.

GBPUSD has declined considerably again after it failed to surpass the short-term moving averages from the beginning of the month. During the preceding week, cable reached a fresh more than two-year low of 1.2380 and touched the return line of the downward sloping channel.

The negatively aligned Tenkan-sen line serves as a testament to the negative short-term momentum that is in place. The RSI indicator is moving south in the bearish territory, while the %K line of the stochastic oscillator created a downside crossover with its %D line, suggesting an extension of the selling interest.

Immediate support to further declines may be taking place around the 1.2360 – 1.2380 support zone, while the 1.2100 handle, identified by the low on March 2017, could provide additional support in case of steeper losses.

A move to the upside may meet resistance near 1.2878, this being a peak recorded on July 12, with the area around it also encapsulating the 23.6% Fibonacci retracement level of the downleg from 1.3380 to 1.2380 near 1.2615. In case of stronger bullish movement could send prices towards the 38.2% Fibonacci mark of 1.2760.

To summarize, GBPUSD looks negative in the near-term, while in the medium-term the picture is seen bearish unless the price breaks above the descending channel, which has been holding since March 13.

Markets

Core bonds had rather dull start of the week with volumes below average. There were no important data scheduled for release while looming key events kept investors sidelined. The German Bund and US T-Note future traded with an upward bias amid a fragile risk environment. The first outperformed the latter in anticipation of a soft expected ECB (Thursday). The US yield curve shifted south with yield declines of about 1 bp across the curve. German yield changes varied from -0.5 bps (2-yr) to -2.2 bps (10-yr). Peripheral spreads widened with Italy underperforming (+7 bps) as fears rise Lega's Salvini could call snap elections. Today's eco calendar (EMU EC consumer confidence) again isn't likely to inspire trading much. The US Treasury starts it's end-of-month refinancing with a $40 bn 2-yr auction which might weigh on UST's. Bunds are expected to remain well bid as today's announcement of Theresa May's successor might bring Brexit uncertainty to the fore. Also, tomorrow's EMU PMI's are the last input to the ECB and might keep investors guarded, favouring core (German) bonds over riskier assets.

The dollar quite easily maintained Friday's gain yesterday. Markets concluded that a 25 bp Fed rate cut next week is the most likely scenario. Speculation on a 50 bp rate cut is probably a bit overdone given recent constructive US eco data. At the same time, investors are avoiding euro long exposure going into this week's ECB meeting. The ECB is expected to lay the groundwork for a 10 bp rate cut in September and probably for additional easing via QE. However, euro longs don't want to be wrong-footed as some pre-emptive ECB action on Thursday can't be excluded. EUR/USD finished the day at 1.1209. USD/JPY closed at 107.87. A better risk sentiment and a rebound in core yields support the dollar late yesterday and this trend continues this morning. EUR/USD dropped below the 1.12 handle. USD/JPY regained the 108 level. Later today, market positioning ahead of Thursday's ECB meeting will continue to dominate trading. The eco calendar is again moderately interesting with EC Consumer confidence. In the US the Richmond Fed manufacturing index and existing home sales will be published. The data will only have intraday significance for USD trading, at best. EUR/USD is nearing the 1.1180/90 support area. Ongoing euro caution in the run-up to the ECB decision might keep the euro in the defensive. A break below this area opens the way for a retest of the 1.11 area. Rising political tensions on Brexit might also weigh on the euro against the dollar. USD/JPY might continue to feel support from a constructive risk sentiment.

Sterling lost ground intraday yesterday as markets prepared for the outcome of vote within the UK conservative party to decide on the new UK Prime Minister. At the same time NIESR painted a bleak picture on the UK economy, even if a hard no deal Brexit can be avoided. EUR/GBP retested the 0.90 area, but closed the day at 0.8985. Today, Boris Johnson is expected to be the winner of the contest to succeed Theresa May as next UK PM. Markets look out for his first comments. However, several moderate Ministers of May's cabinet already indicated to leave their job if Johnson would become the new PM. For now, investors probably will stay cautious on sterling as the nomination of the new PM is not expected to unlock to Brexit stalemate anytime soon.

News Headlines

President Trump announced to have reached a bipartisan debt-limit deal which congressional leaders pledged to support. The agreement would suspend the debt ceiling and increase spending levels for 2 years and now has to be approved by Congress before a six-week recess kicks in.

The New Zealand central bank (RBNZ) has begun updating its unconventional monetary policy strategy. Its economy survived the crisis without resorting to such policies but with rates at historical lows today, the RBNZ acknowledged it should have contingency plans if a new crisis were to hit to economy. The kiwi dollar fell to NZD/USD 0.673.

Pivot (invalidation): 55.85

Our preference Long positions above 55.85 with targets at 56.60 & 57.00 in extension.

Alternative scenario Below 55.85 look for further downside with 55.15 & 54.85 as targets.

Comment Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.

Pivot (invalidation): 16.3700

Our preference Short positions below 16.3700 with targets at 16.1600 & 16.0400 in extension.

Alternative scenario Above 16.3700 look for further upside with 16.5000 & 16.5800 as targets.

Comment The RSI is bearish and calls for further decline.

Pivot (invalidation): 1428.50

Our preference Short positions below 1428.50 with targets at 1415.00 & 1407.00 in extension.

Alternative scenario Above 1428.50 look for further upside with 1435.00 & 1441.00 as targets.

Comment The RSI is bearish and calls for further decline.

Pivot (invalidation): 2974.50

Our preference Long positions above 2974.50 with targets at 2990.00 & 3000.00 in extension.

Alternative scenario Below 2974.50 look for further downside with 2963.75 & 2956.00 as targets.

Comment The RSI calls for a new upleg.

Pivot (invalidation): 12225.00

Our preference Long positions above 12225.00 with targets at 12340.00 & 12400.00 in extension.

Alternative scenario Below 12225.00 look for further downside with 12160.00 & 12100.00 as targets.

Comment The RSI lacks downward momentum.

Pivot (invalidation): 5.6900

Our preference Short positions below 5.6900 with targets at 5.6600 & 5.6310 in extension.

Alternative scenario Above 5.6900 look for further upside with 5.7070 & 5.7240 as targets.

Comment The RSI shows downside momentum.

Pivot (invalidation): 0.7040

Our preference Short positions below 0.7040 with targets at 0.7015 & 0.7000 in extension.

Alternative scenario Above 0.7040 look for further upside with 0.7055 & 0.7065 as targets.

Comment The RSI lacks upward momentum.