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EUR/USD short-term bullish pressures are slowing down. Hourly resistance can be found at 1.1910 (02/08/2017 high) while hourly support lies at 1.1613 (26/07/2017 low). Expected to show renewed bearish pressures.

In the longer term, the momentum is now turning largely positive. We favour a continued bullish bias. Key resistance holding at 1.1871 (24/08/2015 high) has been broken while strong support lies at 1.0341 (03/01/2017 low).

EURJPY is neutral and is finding strong resistance at the key 129.00 level. After several tests of this area, the pair failed to make a successful break above it.

Upside momentum is not strong as indicated by the RSI, which is merely moving sideways along the 50 level. The risk is to the downside as EURJPY is below the Ichimoku cloud on the 4-hour chart. Note though that there was a bullish crossover of the Tenkan-sen line with the Kijun-sen line earlier today.

Failure to break above 129.00 soon would likely carve out a lower high. The market has been making lower highs and lower lows since the August 2 peak at 131.17. The next target would be at the August 18 low of 127.55. Such a move would increase downside pressure and a deeper decline is expected to target the 126 handle.

Only a clear break above 129.00 would shift the focus back to the upside to target 130.00. From here, 130.55 is a key level to break in order to see a re-test of the 131.17 peak, with scope to see a shift in the short-term trend to bullish.

Key Highlights

• The Euro recently recovered towards 129.00 against the Japanese Yen, but failed to gain momentum.
• There are two important bearish trend lines preventing further upsides near 129.00 on the 4-hours chart of EUR/JPY.
• Germany's preliminary Manufacturing PMI for August 2017 posted a rise from 58.1 to 59.4.
• Euro Zone's preliminary Manufacturing PMI for August 2017 posted a rise from 56.6 to 57.4.

EUR/JPY Technical Analysis

The Euro after consolidating near 128.00 against the Japanese Yen corrected higher. However, the EUR/JPY pair struggled near 129.00 and could decline back towards 128.00.

There is a major resistance zone forming near 129.00-129.10. There are two important bearish trend lines preventing an upside break near 129.00 on the 4-hours chart.

Furthermore, the 50% Fib retracement level of the last decline from the 130.39 high to 127.55 low is also at 128.97. The pair already struggled near 129.10 two times and currently following a bearish path.

On the downside, the 128.00 level is a crucial support zone. If the pair moves down from the current levels buyers might take a stand near 128.00.

To sum up, it seems like the pair might consolidate in the 128-129 range for some time before making the next move.

Euro Zone and Germany's Manufacturing PMI

Today in the Euro Zone, the preliminary readings of the Manufacturing Purchasing Managers Index (PMI) for August 2017 were released by the Markit economics.

The market was looking for Germany's preliminary Manufacturing PMI for August 2017 to decline from 58.1 to 57.7. However, the end result was positive, as there was a rise from 58.1 to 59.4.

The Euro preliminary Manufacturing PMI for August 2017 was forecasted to decline from 56.6 to 56.3. Again, the end result was positive, as there was an increase from 58.1 to 57.4.

The report added that:

The manufacturing sector performed strongly, with both output and new orders rising at sharper rates in August. The latter was boosted by the fastest rise in exports for six-and-a-half years. The service sector, on the other hand, saw growth of activity ease to a seven-month low.

The outcome was positive, and may lift EUR/USD and EUR/JPY. However, it won't be easy for buyers to break 129.00.

Spot Gold moved higher on Wednesday after repeated rejection at $1282 support (Tuesday’s low) and moved above rising daily Tenkan-sen ($1284) which contained dip to $1280 on Monday and being dented on Tuesday but the price closed above it, generating positive signal.

Near-term recovery may extend further while the price stays above Tenkan-sen support, however, downside is expected to remain at risk while key barrier at $1292 (Mon/Tue upside rejection) stays intact.

The notion is supported by daily RSI / MACD bearish divergence and loss of $1282 handle may risk extension of pullback from $1300 peak towards $1277/75 (bull-channel support line / rising 20SMA) with extension to $1267 (15/16 Aug higher base) seen on further bearish acceleration.

Sustained break above $1292 pivot is needed to signal higher low at $1280 and re-focus $1300 barrier.

Bullish technicals favor further upside, with consolidation phase expected to precede fresh upside.

Traders are awaiting comments from Fed chief Yellen in Jackson Hole meeting, regarding monetary policy and interest rate outlook, which would generate stronger direction signal.

Res: 1287, 1289, 1292, 1296
Sup: 1284, 1282, 1280, 1277

Summer lull ends for the BRL

After a bumpy start into the summer, caused by the temporary rise in political uncertainty, the Brazilian real has finally returned to its pre-crisis level and stabilised at around 3.15. The move came on the back of falling odds that Michel Temer would face corruption prosecutions together with the approval by Senate of a labour reform.

Interest rates moved accordingly with the 2-year swaps rates consolidating slightly above 8.5%, while on the longer-end of the curve, the 10-year yield stabilised at around 10%. Finally, even though they took their time, CDS rates returned to their pre-crisis levels with the 5-year and 10-year trading at 203bps and 320bps, respectively.

However, since the end of July, USD/BRL has been treading water as investors await impatiently further positive developments on the political side, especially regarding the fiscal situation of the country. Indeed, with inflation back under control, investors will focus almost exclusively on that matter - with the exception of the Fed’s tightening programme - for now on.

The Brazilian government announced it would sell its controlling stake in Eletrobras, Brazil’s largest electricity provider. However, it is far from being a done deal due to regulatory constraint. Nevertheless, those developments are viewed positively by investors as it shows the willingness of Temer’s government to liberalise certain state-held companies. Similar positive developments may ignite a BRL in the coming months should that kind of news continue to flow.

USD/BRL closed at 3.1630 on Tuesday, edging slightly higher by 0.07%. The currency pair will surely gap lower at the opening bell this afternoon as the news will be more than welcomed by investors.

UK - GDP set to continue growing in Q2

UK Q2 GDP will be released tomorrow morning. The British economy is expected to grow 1.7% for the second quarter (annualized). The growth definitely seems to be robust and solid.

Meanwhile, Brexit negotiations are only making slow progress and fears of a Hard Brexit are still present in the markets. In our view, we consider that a Hard Brexit as very unlikely. European Countries have different trade relations with UK and this leads us to think that it will be very complicated that those members agrees on a consensus regarding the negotiations. It seems definitely complicated that the 27 members will all line up against the UK. As a result, this will likely benefit to the UK during this negotiation period.

Since the Brexit vote, the cable has increased from 1.20 to 1.30 and the pair is consolidating slightly above 1.28. There are further room for a weaker GBP in the medium-term as long as markets believe on a likely Hard Brexit or on tough consequences for the UK economy.

The EUR/GBP is soaring. Upper trend line has been broken and consequently the price is above clear POC 0.9170-85 (W H4, upper trend line, D H4). Subsequent retests of the zone could provide the BPC pattern (breakout-pullback-continuation) towards 0.9230. Some short term shorts might come in play around 0.9215-0.9230, but generally the pair is bullish and buying into dips around the POC zone could be the strategy for today.

In line with expectations, the rest of the previous trading session the yellow metal spent in a relatively flat movement against the US Dollar. The pair did not resume the surge, but it also did not manage to sneak through a combination of the 200-hour SMA and the weekly PP at 1,284.70.

Nevertheless, a steady movement to the bottom seems the most viable scenario, as the bullion has entered in a little short-term descending channel.

On the other hand, an aggregate of technical indicators on the 1D timeframe sends an opposite signal, warning that the above support level might be too strong to be so easily bypassed.

The way the currency pair ended up previous trading day shows how it is important in certain cases to take into account the overall market sentiment. As it can be seen from the chart, yesterday the exchange rate has successfully managed to break through a combined resistance level set up by the 100- and 200-hour SMAs as well as the weekly PP.

Despite the 22-pip fall in the early morning, it seems that the rate is moving in a narrow short-term ascending channel. If this assumption is true, the pair might get a chance to gradually surge to the area between 110.10 and 110.30 levels, which represents a location of the northern boundary of a senior descending channel.

In accordance with one of the scenarios expressed yesterday, the currency exchange rate made a confident breakout from the rectangle formation and slipped to the bottom.

The likely impulse for such outcome was provided by a combination of the 55- and 100-hour SMAs near the 1.2881 mark.

At the moment, the currency rate has only one barrier on its way, which is set up by the weekly S1 at 1.2799. In the short run, the pair might a make a rebound.

But, given the general downtrend that started in the beginning of August, the Pound is expected to continue to lose value against the US Dollar.

As it was expected, a release of information on the German Economic Sentiment, which appeared to be even less than analysts anticipated, notably affected valuation of the Euro. Namely, it dragged the currency pair down by 0.34%. And the only obstacle that stopped the fall was the weekly PP located at the 1.1754 level. Given that this barrier practically coincides with the bottom edge of a junior ascending channel, the exchange rate should not plunge any further. From technical perspective it is expected to make a rebound and start to move towards the 1.1800 mark. However, this scenario might not materialize due to the ECB President Mario Draghi speech that will be delivered at 7:00 GMT and that most likely will cause significant volatility in the markets.