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USDTRY opened with a notable gap higher this week, to test the upper boundary of a longer-term symmetrical triangle, before retreating a little. Given also that price action is taking place between the 50- and 200-day simple moving averages (SMAs), the outlook is neutral for now. A break on either side of the triangle is needed to provide the directional bias.

Short-term momentum indicators don’t paint a clear picture either, with the RSI pointing up but being below 50, and the MACD testing its red trigger line.

On the upside, a break above the January peak of 5.79 and the upper end of the triangle would turn the picture to cautiously positive, opening the way for a test of the 50-day SMA and the 5.93 zone. Another bullish break from there would confirm the positive bias, with the next obstacle being the May 22 high of 6.15.

On the downside, a decisive move below the crossroads of the 5.58 level, the 200-day SMA, and the lower bound of the triangle would turn the picture back to negative, opening the door for a test of 5.30.

In brief, a break above 5.79 or below 5.58 is required to change the current neutral outlook.

Daily Pivots: (S1) 135.60; (P) 135.82; (R1) 136.16; More...

Intraday bias in GBP/JPY remains neutral at this point. Some consolidations could be seen above 135.17 temporary low first. Upside of recovery should be limited by 137.78 resistance to bring fall resumption. Break of 135.17 will resume the fall from 148.87 and target 131.51 low next.

In the bigger picture, current development suggests that GBP/JPY's medium term fall from 156.59 (2018 high) is still in progress. Break of 131.51 will target 122.36 (2016 low). Structure of such decline is corrective looking so far, arguing that it's just the second leg of consolidation from 122.36. Thus, we'd expect strong support from 122.36 to contain downside to bring reversal.

• US dollar roars higher on surprise jump in US payrolls
• But stocks are sold off as investors trim expectations of aggressive Fed rate cuts
• Attention now turns to Powell’s semi-annual testimony in Congress for policy clues

Strong US jobs report puts dollar back in the front foot

The US dollar was trading close to Friday’s highs today when it surged on the back of a much better-than-expected nonfarm payrolls report. The US economy added 224k jobs in June, significantly higher than the 160k expected and a strong rebound on the downwardly revised 72k reported in May. The impressive data suggests the American economy still has plenty of momentum and is far from needing aggressive intervention by the Federal Reserve to bolster it.

The dollar index jumped to a near three-week high of 97.44 on Friday, while against the yen, the greenback was comfortably back above the 108 handle. There were no escapees from the dollar’s comeback, which triggered a major negative correction in currencies such as the Australian and New Zealand dollars that had been rallying in recent weeks on strengthening expectations that the Fed will soon engage in extensive policy easing and surpass the loosening by their own respective central banks.

European currencies also suffered heavy losses. The euro came close to breaching the $1.12 level, as apart from the resurgent dollar, investors expect Christine Lagarde, the nominee to replace Mario Draghi at the helm of the European Central Bank, will pursue a dovish policy agenda. The pound, meanwhile, brushed a six-month low of $1.2479 amid growing signs of a weakening British economy and a shift by the Bank of England away from its tightening bias.

Stocks slip as markets want a rate cut

Although positive economic news would normally be received well by the stock market, equity traders were clearly disappointed from the unexpected improvement in the US labour market. Wall Street’s leading share indices closed marginally lower on Friday, but Asian stocks took the brunt of the beating today from the diminishing odds that the Fed will cut rates by as much as 50 basis points at its July meeting.

Most Asian bourses fell by between 1% and 2.5%, though equity futures were pointing to more modest losses for European and US stocks. The sea of red across stock markets was solely defined by the paring back of expectations that the Fed will loosen policy significantly this year rather than by risk aversion as Treasury yields rallied from the strong US data. This in turn weighed on gold, which briefly dipped below $1400 on Friday before recovering slightly.

But with most world central banks still expected to move towards more accommodative policy in the coming months, sentiment for gold remains bullish and investors are still fully pricing in a 25bps rate cut by the Fed later this month even though a bigger reduction is now off the table. There were also some doubts creeping in regarding the need for additional Fed rate cuts by the end of the year, following July’s anticipated move. Recent data from the US has been on the soft side and despite the strong headline payrolls number, wage growth came in slightly below forecasts, pointing to still muted inflationary pressures.

Powell testimony eyed

This puts all the more focus on this week’s semi-annual testimony before Congress by Fed Chairman Jerome Powell on Wednesday and Thursday. The Congressional hearings could be Powell’s last chance to tone down market expectations of lower rates before the next policy meeting at the end of July, or to signal that a cut is a done deal.

The Bank of Canada will also be under the spotlight this week as its meets on Wednesday for its policy decision. The Canadian dollar quickly recouped its losses versus the greenback after the jobs report despite Canada’s own disappointing employment figures on Friday as investors are increasingly convinced the BoC won’t be cutting rates anytime soon.

Also worth keeping an eye on later this week are planned trade discussions between US and Chinese officials as negotiators attempt to get the stalled talks back on track. However, expectations are low that any substantial progress can be made this week.

Daily Pivots: (S1) 121.53; (P) 121.73; (R1) 121.99; More....

Intraday bias in EUR/JPY remains neutral for the moment. We're favoring the case that consolidation from 120.78 has completed with three waves to 123.35. Below 121.31 will target retest of 120.78 first. Break will resume fall from 127.50 to 118.62 low. In case of another rise as consolidation from 120.78 extends, upside should be limited by 123.73 resistance to bring fall resumption eventually.

In the bigger picture, down trend from 137.49 is still in progress with the cross staying inside long term falling channel. Break of 118.62 will extend the fall to 109.48 (2016 low). On the upside, break of 127.50 resistance is needed to be the first sign of medium term reversal. Otherwise, outlook will remain bearish in case of strong rebound.

Daily Pivots: (S1) 0.8951; (P) 0.8968; (R1) 0.8978; More...

Intraday bias in EUR/GBP remains neutral for consolidation below 0.8992 temporary top. With 0.8872 support intact, further rise is expected. However, considering bearish divergence condition in 4 hour MACD, we'd look for topping signal as it approaches 0.9101 key resistance. On the downside, break of 0.8872 will indicate short term topping. In this case, deeper pull back could be seen to 55 day EMA (now at 0.8830) first.

In the bigger picture, medium term decline from 0.9305 (2017 high) is seen as a corrective move. No change in this view. Current development argues that it might have completed with three waves down to 0.8472, just ahead of 38.2% retracement of 0.6935 (2015 low) to 0.9306 at 0.8400, after hitting 55 month EMA (now at 0.8527). Decisive break of 0.9101 resistance will confirm this bullish case. Nevertheless, as EUR/GBP is still staying inside long term falling channel, correction from 0.9305 could still extend to 0.8400 fibonacci level before completion, if upside is rejected by 0.9101.

EUR/USD

Current level - 1.1225

The violation of 1.1250 shows a bearish bias, for a test of 1.1180 lows. Initial intraday hurdle is 1.1250 and crucial on the upside is 1.1320.

USD/JPY

Current level - 108.30

The test of 108.10 resistance  was successful and the bias is positive, for a break through 108.80 zone. Initial intraday support lies at 108.10.

GBP/USD

Current level - 1.2523

The bias is negative below 1.2550, for a tight test of 1.2440 area. Crucial on the upside is 1.2600.

Daily Pivots: (S1) 1.6043; (P) 1.6078; (R1) 1.6118; More...

Intraday bias in EUR/AUD is neutral for consolidation above 1.6025 temporary low first. Upside of recovery should be limited below 1.6259 resistance to bring fall resumption. Decline from 1.6448 is now seen as the third leg of the consolidation pattern from 1.6765 high. Break of 1.6025 will target 1.5683 support and below.

In the bigger picture, as long as 1.5346 support holds, outlook will still remain bullish. Up trend from 1.1602 (2012 low) is expected to resume sooner or later. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal and turn outlook bearish.

Daily Pivots: (S1) 1.1113; (P) 1.1130; (R1) 1.1151; More...

EUR/CHF is staying in consolidation from 1.1056 and intraday bias remains neutral at this point. In case of another recovery, upside should be limited below 1.1264 resistance to bring fall resumption. On the downside, break of 1.1056 will extend the larger down trend for 61.8% projection of 1.2004 to 1.1173 from 1.1476 at 1.0962 next.

In the bigger picture, current development firstly suggests that down trend from 1.2004 is still in progress. More importantly, it's likely a long term down trend itself, rather than a correction. Outlook will remain bearish as long as 1.1476 resistance holds. EUR/CHF could target 1.0629 support and below.

The GBP/JPY has formed bearish pattern (small rooftop) at the resistance zone 135.90-136.05. The price was been dropping during the Tokyo Session and we might see a continuation during London and New York sessions.

As long as the price is held below 135.90, it is bearish. However, bears need a strong impulse towards 135.40 zone. If it breaks the next level to watch for is 135.15 which is a historical double bottom. The close below the level implies for more bears to come with a stronger momentum down. The final target is W L4 camarilla pivot 134.43. If the price reaches 135.15 and doesn’t break it, watch for an upside bounce.

The precious metal was seen giving up the gains on Friday as it extended declines for the third consecutive day. Gold closed 1.18% lower on Friday following the US payrolls report which came out stronger than expected.

The payrolls report dampened expectations of easy monetary policy. Improved market sentiment also helped to keep the price of the precious metal in check.

Gold Breaches the Trend Line

Gold prices broke past the rising trend line connecting the lows from May 30 and June 17. The breach of this trend line potentially indicates a move to the downside. The minor support at 1383.60 remains the initial barrier. However, a break down below this level could push gold lower to the 1354 handle. To the upside, the resistance level at 1404 will likely keep a lid on the gains.