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Sideways price activity on EURUSD since end of May suggests that a wave four triangle is unfolding. A triangle is a five-wave contracting or expanding movement within two trend lines, which unfolds prior to the final leg. In our case we are observing a bearish triangle, which can push prices lower once fully finished. At the moment we see price ending wave e) at the 1.175 level, meaning that a new reversal can be near. However, only a drop in impulsive fashion and a break below the 1.1573 level would confirm more weakness.

EURUSD, 4h

WTI oil price remains in a choppy and directionless mode for the third straight day, on conflicting fundamentals which lack clearer direction signals.

The price rose slightly on Tuesday, keeping temporary base at $67.58, supported by rising daily cloud top, intact for now.

Oil price rose to $69.29 on Monday, driven by though rhetoric of President Trump regarding tensions with Iran, but gains were short-lived as concerns about oversupply prevailed and sent oil price lower.

Tuesday's bearish daily candle with long upper shadow signaled strong upside rejection and warning about rising pressure, accompanied by weak momentum studies and multiple bear-crosses of falling 10SMA.

Key near-term support, provided by rising 100SMA ($67.51) is under pressure but holds for now and keeps the downside protected.

Break here and below double-bottom at $67.03 would generate bearish signal for continuation of larger downtrend from $75.34.

Conversely, close above falling 10SMA (currently at $68.81) would ease downside risk, but lift and close above 55SMA pivot ($69.30) is needed to generate initial reversal signal.

Res: 68.31, 68.81, 69.30, 70.00
Sup: 67.51, 67.02, 66.36, 64.90

EUR struggles to hold gains

During the Asian session, the US dollar extended yesterday’s gains but quickly lost its advance as risk sentiment continued to improve. After sliding to $1.1655, the single currency bounced back towards the 1.17 threshold. It is going to be a big week for the single currency as Mario Draghi is much awaited by market participants. The European Central Bank governing council will gather this week in Frankfurt to discuss monetary policy. As usual, the attention will focus on the council’s view of the economic outlook as well as inflation development. Since the June meeting, investors have reviewed there expectations to the downside and do not expect the ECB to hike interest rate before at least summer 2019.

Looking at the euro price developments, the single currency has most likely bottomed out this year as US rates struggle to keep upside momentum. Therefore, the $1.1510 would most likely remain the lowest level seen this year. Even though further euro appreciation appears the most likely scenario, the uncertainty generated by the trade war could cap those potential gains. The area’s composite purchasing manager index already eased to 54.3 in July, down from 54.9 in the previous, signalling a weak start into the third quarter. Although, we remain confident the single currency is poised to appreciate against the greenback against the backdrop of stalling US rates and upcoming ECB tightening, the uncertainty generated by the trade conflict has skewed the game toward the USD, at least in the short-term.

Will a rate hike suffice to stabilize the Turkish lira ?

June 24 presidential elections in Turkey gave Erdogan an unambiguous victory, confirming his second mandate as Turkish leader for another five years. However, in the view of investors, this puts into question the Central Bank of Turkey (CBT) independent status in managing Turkey’s monetary policy mandate since Erdogan recent declaration that he would have a greater say on monetary decisions.

Erdogan confirmed at multiple occasions his reluctance to higher interest rates, interpreted as a barrier to economic growth, a rather bad news for the lira, which already depreciated by 25.60% and 22.25% against USD and EUR since the beginning of the year.

Accordingly, the question raised is whether the new regime will have sufficient credibility in order to support the lira, or not. And today’s CBT monetary policy meeting decision will be decisive. Turkey’s inflation increased by 3% intra-month and is estimated above 15% while the current account balance continues to widen (USD -5.89 billion as of May 2018), partly due to a weaker lira, thus necessarily requiring higher interest rates.

The CBT already intervened on the marketplace in early June by raising its one-week repo rate by 125bps to 17.75% in order to support the currency. Accordingly, a move below 125 bps would be interpreted negatively by market participants, which would assume that the government maintains a certain control over the monetary authority, causing further TRY weakness.

Early trading session suggest further Turkish lira weakness, currently trading along 4.76, the USD/TRY is expected to decline further, the announcement will however have an impact on the intensity of the currency move. We expect the rate hike to remain at 100 bps, which will push the pair along 4.85 in the short-term.

The US dollar remains bearish against the Japanese yen currency on Tuesday, as risk-off trading sentiment continues to dominate financial markets. The USDJPY pair is likely to weaken further while trading below the pivotal 111.39 resistance level. Sellers will continue to target further downside below the 110.70 level, while buyers will look to stabilize price back above the 111.39 level.

The USDJPY pair is bearish while trading below the 111.39 level, key support is found at the 110.70 and 110.10 levels.

If the USDJPY pair holds above the 111.39 level, buyers may test back towards the 112.20 and 112.80 levels.

The British pound has started to recover higher against the US dollar on Tuesday, after finding strong technical support from the 1.3070 level earlier today. The GBPUSD pair can only recover higher while price continues to hold firm above the key 1.3100 level. GBPUSD sellers will now target extended losses below the 1.3080 level, while GBPUSD buyers will continue to target gains above the 1.3155 resistance level.

The GBPUSD pair is only bearish while trading below the 1.3100 level, key technical support remains at the 1.3080 and 1.3050 levels.

If the GBPUSD pair holds above the 1.3100 level, key intraday resistance is found at the 1.3155 and 1.3194 levels.

The situation in the world markets looks controversial. Shares are growing after strong reporting of companies. The shares of Alphabet (#Google) jumped by 3.6% after the market closed on Monday, bringing capitalization of the company to $870 billion on strong quarterly reporting, despite a big fine imposed by the EU. By capitalizing the search engine giant is at a striking distance of Amazon, the 2nd most valuable company after Apple.

In Asia, positive stocks dynamics is supported by news that Beijing will soften the fiscal policy, intending to spur the growth of economy. The factor of positive dynamics of China looks strong in the short term, probably supporting the demand for risks at the start of trading on Tuesday.

In the calculation for a longer perspective, it is worth paying attention to the yields growth on debt markets and strengthening of safe-haven currencies. In the global market, the dollar grew on Monday, adding 0.3% against the backdrop of fears that the central Bank of Japan and the Eurozone would give up incentives at the time when world growth became less synchronous and robust. These fears fuel the sale of bonds, causing the yields increase.

This is a precondition for a dangerous situation. Bilateral trade tariffs additionally stimulate inflation, which is already close to the target levels or slightly exceeds them in some countries. The lowest unemployment rate in the decade will only accelerate this process. At the same time, fears around trade wars harm economic growth, which already shows a slowdown. As a result, global growth is becoming more fragile and less able to survive the tightening of monetary policy. In addition, high inflation will limit the ability of the CBs to stimulate growth.

EUR/USD

Current level - 1.1695

Despite the short-lived dip to 1.1650, the overall outlook remains positive, for a rise towards 1.1790.

USD/JPY

Current level - 111.23

The rebound above 110.70 has been capped at 111.40, so allow another dip to the mentioned low, en route to 110.25.

GBP/USD

Current level - 1.3116

The pullback below 1.3150 is corrective and the support area around 1.3080 should start a new rise, towards 1.3190.

The Australian dollar shows indecision as early Tuesday's trading was shaped in Doji, following Monday's strong close in red after another rejection at strong 0.7440 resistance zone. Mixed techs show little direction signals (MA's remain in bearish configuration, momentum is neutral, while slow stochastic heads north). The pair looks for a catalyst to break out of current congestion and tomorrow's release of Australian CPI data expected to trigger stronger action. Annualized inflation is expected to rise in Q2 (2.2% f/c vs 1.9% in Q1) while positive forecast is also for quarterly figure (0.5% f/c vs 0.4% prev). Strong number could offer fresh support to the Aussie for eventual break through 0.7440 pivot and acceleration towards key barriers at 0.7474 (55SMA) and 0.7483 (10 July high). On the other side, downside risk is expected to persist while the price holds below a cluster of daily MA's, with weaker than expected inflation number to add on existing negative tone and risk retest of 0.7310/17 base.

Res: 0.7388, 0.7404, 0.7442, 0.7474
Sup: 0.7359, 0.7343, 0.7317, 0.7310

The pair stands at the back foot on Tuesday after Monday's action ended in long-tailed Doji after spiking to 110.75 but closing above rising 20SMA (111.31). Recovery attempts in early European trading were capped by thick hourly cloud which maintains pressure (cloud base lays at 111.37). However, chances of stronger recovery exist as yesterday's long-tailed candle signals strong downside rejection, with momentum picking up and slow stochastic attempting to reverse from oversold zone. Repeated close above 20SMA is seen as minimum requirement for reversal scenario, with further positive signal expected on close above 111.67 (Fibo 38.2% of 113.17/110.75), while lift and close above 10SMA (112.12) would confirm reversal. Negative outlook could be expected on close below 20SMA, while break below 30SMA (110.99) and Monday's low (110.75) would signal bearish continuation towards 55 SMA (110.46) and 200SMA (110.10).

Res: 111.37, 111.54, 111.67, 112.12
Sup: 110.99, 110.75, 110.46, 110.10

Cable bounces from the session low at 1.3071, following failure on initial attempt below 5SMA pivot (1.3084, now in sideways mode). Recovery attempts need to hold below falling 10SMA (1.3141) to keep negative tone, supported by weakening momentum and bearish setup of MA's, but partially offset by north-heading slow stochastic. Near-term sentiment remains bearish on Brexit concerns and stronger dollar, favoring eventual break below 5SMA, for attack at psychological 1.30 level and possible extension towards key support at 1.2957 (19 July low). Conversely, close above falling 10SMA would generate initial bullish signal and sideline immediate downside risk, but lift above 20 / 30 SMA's (1.3170/1.3196 respectively) is needed to confirm scenario.

Res: 1.3129, 1.3141, 1.3170, 1.3196
Sup: 1.3071, 1.3049, 1.3000, 1.2957