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AUDUSD rose to a high of 0.7987 on July 20 before steadying. The pause in the rally suggests that a temporary top is now in place as the market lost upside momentum. Looking at the 4-hour chart, the weakening in momentum is indicated by the RSI which fell after reaching overbought levels above 70.

The near-term bias has turned neutral for consolidation. Support is provided at 0.7890, which is the 23.6% Fibonacci retracement level of the rise from 0.7571 to 0.7987 (July 7 to July 20). Further support is provided by subsequent Fibonacci levels at 0.7830 and 0.7780.

The 20-day moving average was acting as a resistance level in recent days, capping AUDUSD around 0.7930. Prices are currently testing this level and have risen above it. Should prices continue to rise, this prior resistance level will turn to support and a further rise could target the July 20 high of 0.7987. From here, the uptrend will resume.

The positively aligned moving averages and the rising 50-day MA are supporting a bullish outlook in the short-term. There was a bullish crossover of the 20-day day with the 50-day MA on July 12.

There has been no confirmation of a trend reversal yet and the current consolidation pattern could be a temporary pause before the uptrend resumes. For now, the bias remains neutral on the 4-hour chart.

As Asian traders were about to complete their trading day, the dollar index was up on the day after previously hitting a fresh 13-month low. Excluding aussie/dollar, most major pairs were moving within a relatively narrow range during Asian trading hours, while gold was down after recording a one-month high.

The dollar's index against a basket of major currencies fell to 93.82 today – it's lowest since June 24 of last year. It later managed to recover to last trade 0.1% up on the day. Still the greenback is likely to remain under pressure on the back of developments on the US political front that have the capacity to derail the Trump administration's plans on tax reform and infrastructure spending. The latest blow for President Donald Trump was White House spokesman Sean Spicer's resignation on Friday. Rising uncertainty is spurring demand for US Treasuries, pushing yields down and making the US currency relatively less attractive.

Dollar/yen was down on the day and close to the more than one-month low of 110.76 it recorded earlier in the day. Euro/dollar was slightly down after previously hitting a fresh 23-month high of 1.1684. The eurozone's common currency strongly rallied last week following the European Central Bank meeting. This week it will likely need fresh catalysts in order to maintain momentum. Pound/dollar was up on the day and marginally above the 1.30 handle after opening below this level.

In terms of releases, Japan's July preliminary manufacturing PMI was released at 52.2. Expectations were for a reading of 52.3, while June's respective number stood at 52.4. Dollar/yen edged higher upon release of the data, though the greenback's gains were short-lived.

The Australian and New Zealand dollars remained close to multi-month highs relative to the greenback. Aussie/dollar traded at 0.7952, up 0.6% on the day and fairly close the more than two-year high of 0.7987 from last week. Reserve Bank of Australia Deputy Governor Guy Debelle's dovish remarks last week halted the aussie's advance versus the US currency. Kiwi/dollar was slightly down at 0.7436, but close to Friday's near 13-month high of 0.7458.

Away from forex markets and in commodities, gold gained on the back of overall dollar weakness and potentially rising uncertainty. The precious metal rose to a one-month high of $1257.03 an ounce. It later fell possibly due to profit taking. It last traded around $1254.50. WTI and Brent crude were up 0.2% and 0.3% on the day, at $45.84 and $48.17 a barrel respectively.

Throughout the rest of the day, market participants will be mostly paying attention to preliminary manufacturing and services PMI data out of the eurozone and the US for the month of July, as well as June existing home sales for the US.

Weekly

    •    Last Candlesticks pattern: Shooting star 
    •    Time of formation: 03 May 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 3 May 2016
    •    Trend bias: Sideways

EUR/USD – 1.1648

The single currency has surged again after brief pullback, adding credence to our bullish view that recent upmove is still in progress and price already exceeded indicated upside targets at previous chart resistance at 1.1616, bullishness remains for medium term upmove to extend further gain to another previous resistance at 1.1714, break there would encourage for headway to 1.1800-10 but near term overbought condition should limit upside and price should falter below 1.1870-80, bring retreat later.

On the downside, whilst initial pullback to previous resistance at 1.1583 is likely, reckon the Tenkan-Sen (now at 1.1527) would limit downside and bring another rise later to aforesaid upside targets. Below support at 1.1435 would defer and risk correction towards  the Kijun-Sen (now at 1.1402) but only a daily close below support at 1.1370 would signal a temporary top is possibly formed, bring further fall to 1.1312 support but previous resistance at 1.1296 should remain intact. 

Recommendation: Buy at 1.1530 for 1.1750 with stop below 1.1430.

On the weekly chart, last week’s rally formed another white candlestick and current firmness add credence to our view that recent upmove from 1.0340 low is still in progress and bullishness remains for this move to extend further gain to previous chart resistance at 1.1714, however, break there is needed to retain upside bias and encourage for headway to 1.1800-10, having said that, near term overbought condition should limit upside to 1.1900 and price should falter below 1.2000, risk from there is seen for a retreat later.

On the downside, although pullback to 1.1530-40 is likely, reckon 1.1475-80 would contain downside and bring another rise later. Below 1.1435 would risk test of the Tenkan-Sen (now at 1.1397) but only a weekly close below support at 1.1370 would signal a temporary top is formed instead, bring correction to 1.1312 support, having said that, previous resistance at 1.1285 should turn into support and 1.1200-10 should hold, price should stay above strong support at 1.1109-19, bring another upmove later. 

GBP/USD

Current level - 1.2991

Despite the slow pace, the bias remains positive, for a test of 1.3050, en route to 1.3130 area. Crucial on the downside is 1.2960 low and an eventual break through the latter will signal a renewal of the dive towards 1.2860.

USD/JPY

Current level - 111.06

The downtrend remains absolutely intact and a break through 110.30 support should challenge directly 109.30 dynamic projection. Minor intraday resistance lies at 111.50.

EUR/USD

Current level - 1.1646

The recent peak at 1.1682 has initiated a minor pullback and the intraday bias is negative, for a test of 1.1617 and even 1.1580 area. Major hurdle lies at 1.1720.

Weekly

    •    Last Candlesticks pattern: Marubozu
    •    Time of formation: 14 Nov 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 15 Feb 2017
    •    Trend bias: Down

USD/JPY – 110.85

The greenback only recovered to 112.42 late last week before meeting renewed selling interest and the subsequent selloff adds credence to our bearish view that the rebound from 108.82 has ended at 114.50 and the decline from this top is still in progress for further weakness to 110.00, having said that, as broad outlook remains consolidative, reckon downside would be limited to 109.40 and said support at 108.82 should remain intact.

On the upside, whilst initial recovery to 111.40-50 is likely, reckon upside would be limited to resistance at 112.08 and bring another decline later. A daily close above said resistance at 112.42 would defer and suggest low is possibly formed, bring test of the Kijun-Sen (now at 112.60), break there would suggest first leg of decline from 114.50 has ended, bring a stronger rebound to 113,00, however, still reckon upside would be limited to 113.55-60 and 114.00 should hold, bring another decline later. 
 
Recommendation : Sell again at 112.00 for 110.00 with stop above 113.00.

On the weekly chart, as dollar’s retreat from 114.50 has kept price under near term pressure, adding credence to our view that top is possibly formed at 114.50 and consolidation with downside bias remains for weakness to the lower Kumo (now at 110.25), below there would extend fall to 109.40-50, however, reckon indicated support at 108.82 would limit downside and price should stay well above support at 108.13, bring recovery later.

On the upside, although recovery to the Tenkan-Sen (now at 111.66) cannot be ruled out, reckon upside would be limited to 112.05-10 and bring another decline later to aforesaid downside targets. Above 112.42 would bring a strong recovery to 113.00, however, reckon upside would be limited to 113.55-60 and price should falter well below said resistance at 114.50. Only a break above 114.50 would signal the rebound from 108.13 is still in progress for gain towards resistance at 115.51 but a weekly close above there is needed to signal the fall from 118.66 top has ended at 108.13, then headway to 116.00-10 would follow but resistance at 117.53 should hold from here.

Sunrise Market Commentary

• Rates: New upward potential Bund, especially if German 10y yield drops below 0.5%
  Draghi's dovish performance on Thursday, the risk-off correction on European stock markets (Thursday/Friday) and the volatile, but downwardly oriented, oil price (Friday ahead of today's OPEC vs non-OPEC meeting) suggests some more consolidation in the Bund (correction higher). The German 10-yr yield tests important support (0.5%).
• Currencies: Dollar continues fighting an uphill battle
  Dollar weakness continues to dominate USD trading. Political uncertainty in the US weighs on the US currency and Draghi's comments didn't prevent further by-default euro buying. Today's US and EMU confidence data probably won't change the established USD negative trend. We don't expected a meaningful comeback of the dollar ahead of the Fed policy decision

The Sunrise Headlines

• European equities were hard hit on Friday, as the euro continued to gain ground against the dollar. US equities ended little changed after recouping early losses. Asian equities trade mostly slightly positive overnight with the exception of the Japanese equities which are hit by yen strength.
• Japanese PMI business confidence weakened slightly in July. The headline index fell to 52.2 from 52.4 in June. Levels above 50 suggest expanding activity.
• A new EU competition investigation into Germany's top carmakers threatens the credibility of the entire industry, a German minister has warned, after Brussels confirmed it was probing suspected collusion on technology.
• Better growth in China, the euro zone and Japan is making up for a slower US economy, Trump's stalled economic promises and a faltering UK, the IMF said. 2017/18 global growth was confirmed at 3.5%/3.6%.
• Greece's sovereign credit rating's (B-) outlook was raised to positive by S&P, boosting the government in Athens, as it ponders a return to bond markets. The IMF agreed to a new $1.8B conditional loan for Greece on Thursday.
• Brent oil stabilized around $48/barrel overnight, after dropping sharply on Friday and ahead of a meeting between OPEC and non-OPEC regarding production cuts later today.
• Today, the market calendar contains the EMU and US July PMI business surveys, the US Existing Home sales and speeches of ECB Smets and BoE Brazier. OPEC meets non-OPEC countries to discuss production cuts.

Currencies: Dollar Continues Fighting An Uphill Battle

USD fights an uphill battle

On Friday, overall dollar weakness continued to dominate FX trading. Uncertainty on the potential political fall-out of the investigations against president Trump and people close to him are weighing on the dollar. At the same time, the euro extended a by default rally. Draghi's comments on the ECB press conference can only be considered as soft, but he also didn't seem overly worried on the recent euro strength. EUR/USD closed the session at 1.1683 (from 1.1631). USD/JPY finished the week at 111.13 (from 111.61 on Thursday evening).

Today, attention goes to the business sentiment data (Markit) and to a meeting between OPEC and non-OPEC countries in Russia. The EMU business sentiment indicators showed an unexpected mixed picture (at high levels) in June. The manufacturing PMI still improved, but the services PMI declined. Given the additional euro strength, we see downside risks for the manufacturing sector in July, but maybe some rebound in services confidence, as domestic demand fundamentals remain strong. The EMU data probably won't be a game-changer for euro trading, unless they show a really big surprise. If data would be unexpectedly strong, they might reinforce euro positive momentum. The focus will be on the US side of the story. Political uncertainty is probably here to stay and won't help the dollar short-term. Markets will also look forward to the Fed policy decision on Wednesday. The Fed will confirm its intention to continue policy normalisation and might even give some concrete hints on the start of the reduction of the balance sheet. At the same, time they probably can't ignore the recent softening in inflation. There is already quite some negative news discounted for the dollar after the recent setback, but we see no trigger yet for a positive U-turn on the US dollar. For that to happen, the dollar needs some really positive news. Strong US eco data next week might bring some relief, but that's still far away. For now there is not good reason to try to catch the falling knife.

USD: technical picture worsens further

EUR/USD rebounded above the 1.1300/66 resistance at the end of June. The payrolls and other recent data were not good enough to trigger a sustained USD rebound. Finally EUR/USD broke beyond the 1.1489/1.15 resistance, paving the way to the LT-correction tops at 1.1616/1.1714. A break would end the long consolidation that followed the sharp decline of EUR/USD in 2014/early 2015. Such a key area is not easy to break. We don't preposition for a break, but the pressure is mounting. Return action below 1.13 would be a first indication of a loss in upside momentum.

The USD/JPY rally ran into resistance in May and the pair returned lower in the 108.13/114.37 range. The post-Fed USD rebound pushed the pair above the 112.13 correction top, but follow-through gains remain modest. USD/JPY 114.37 resistance was tested, but the test was rejected. The pair is currently drifting lower in the brooder consolidation pattern between 114.50 on the topside and 108.83/13 on the downside. A test of the downside is of the range is becoming ever more likely?. This suggests a pause in the recent USD/JPY uptrend. We stay cautious on USD/JPY long positions despite the recent decent performance

EUR/USD: top MT consolidation pattern under heavy strain

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USD/CHF - 0.9475

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9460

Kijun-Sen level                    : 0.9476

Ichimoku cloud top                 : 0.9558

Ichimoku cloud bottom              : 0.9533

Original strategy :

Sell at 0.9555, target: 0.9455, Stop: 0.9590

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.9555, target: 0.9455, Stop: 0.9590

Position : -

Target :  -

Stop : -

The greenback has recovered after falling to 0.9438 on Friday suggesting consolidation above this level would be seen and corrective bounce to 0.9500 and then 0.9520-25 cannot be ruled out, however, reckon the upper Kumo (now at 0.9558) would limit upside and bring another decline later, below said support at 0.9438 would extend recent decline to 0.9405-10 but loss of momentum should limit downside to 0.9375-80, price should stay above 0.9350, risk from there is seen for a rebound later.

In view of this, we are looking to sell dollar on recovery as 0.9550-55 should limit upside and bring another decline. Above 0.9580-85 would suggest a temporary low is formed instead, bring a stronger rebound towards resistance at 0.9622 which is likely to hold from here.

USD/CHF bounced back from the 0.9440 long term support level, yesterday we had a false breakdown below this level, but only an accumulation could give birth to another leg higher. Moves within an extended sideways movement on the long term, so a valid breakdown below the 0.9440 static support will confirm a further drop in the upcoming months.