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EUR/USD

The greenback edged higher for a second consecutive day against the common currency, with the pair trading as low as 1.1335 before settling a few pips above it. A holiday in the US forced markets into an early close this Tuesday, with action only limited to the Canadian dollar during the last trading hours of the day. The EUR/USD pair advanced up to 1.1373 early Asia, but pulled back afterwards, helped by poor EU PPI figures, as inflation at factory levels fell by 0.4% in May, doubling expectations of a 0.2% decline and well -below the 0.0% printed in April. On a positive note, the EU commission approved the rescue of Italian Banca Monte dei Paschi di Siena by a 5.4 billion-euro capital injection from the local government. This Wednesday, the EU will see the release of the final Markit services and composites PMIs for June, but attention will center in the upcoming FOMC Minutes in the US afternoon.

From a technical point of view, the pair is pressuring the 38.2% retracement of last week's rally at 1.1340, still unable to break below it, but gaining short-term bearish traction as bounces from the level stalled short of the next Fibonacci level, now the immediate resistance at 1.1380. In the 4 hours chart, the 20 SMA turns south above the current level, whilst technical indicators remain within bearish territory, although with limited downward strength amid the absence of volume. The key support anyway, remains to be 1.1290, the low set on June 28th, with a break below it favoring a steeper decline ahead.

Support levels: 1.1340 1.1290 1.1250

Resistance levels: 1.1380 1.1420 1.1460

USD/JPY

The USD/JPY pair bounced from a daily low of 112.73 reached at the beginning of the day after North Korea said it successfully test fired an intercontinental ballistic missile. The sour sentiment extended into the European session, with most indexes closing in the red. The pair recovered early London as the dollar got once again investor's favor, but the rally was contained around the current 113.20 level. The June Markit services PMI will be released during the upcoming Asian session, last seen at 53, while in the US, attention will center on the FOMC Minutes, to be released later on Wednesday. Also, backing the recovery in the pair were US Treasury yields, which held at the two-month highs reached on Monday. The short term picture for the pair shows that the upward momentum eased, but also that the risk remains towards the upside, as the 100 SMA extends its advance above the 200 DMA, both well below the current level, while the RSI indicator consolidates around 61. Additionally, the pair recovered after briefly breaking below the 23.6% retracement of its latest decline, the immediate support at 112.90.

Support levels: 112.90 112.50 112.10

Resistance levels: 113.45 113.90 114.40

GBP/USD

The Pound maintained the sour tone this Tuesday, extending its decline against the greenback down to 1.2911, its lowest since last Wednesday. The Sterling suffered from the release of the Markit Construction PMI, as the index came at 54.8 in June, down from 56.0 in May. The report attributed the slowdown in the construction sector to risk aversion among clients, reflecting concerns about the economic outlook and political uncertainty. The UK services PMI will be released this Wednesday, expected at 53.5 from previous 53.8. Should the release miss expectations, the GBP will be subject of further sells. Technically, the 4 hours chart shows that the pair is biased lower, as its developing below its 20 SMA, currently at 1.2975, whilst technical indicators remain within bearish territory, with the RSI now at 47, anticipating some further slides on a break below 1.2910. A first line of selling interest waits around 1.2960, the immediate short term support, with the downward pressure easing on a recovery beyond it.

Support levels: 1.2910 1.2870 1.2825

Resistance levels: 1.2960 1.2995 1.3040

GOLD

Spot gold saw limited action this Tuesday, ending the day barely up at $1,223.39 a troy ounce, as mounting risk aversion on geopolitical tension in Asia, triggered demand for the safe-haven asset, later reverted by renewed dollar's demand. The bright metal was confined to a tight range at the lower end of Monday's range, as investors were cautious ahead of the FOMC Minutes´ release this Wednesday. The US Federal Reserve is not expected to surprise markets, but a hawkish change in the wording could fuel recent dollar's advance. From a technical point of view, the daily chart shows that the early advance was rejected by selling interest around the 200 DMA, whilst technical indicators lost their bearish strength, but hold near oversold levels, supporting the ongoing downward move. In the 4 hours chart, the price is developing below a strongly bearish 20 SMA, while indicators consolidate within oversold territory, in line with the longer term perspective.

Support levels: 1,219.30 1,211.10 1,203.80

Resistance levels: 1,224.40 1,236.50 1,241.80

WTI CRUDE OIL

Crude oil prices managed to advance modestly at the beginning of the day, but closed it pretty much unchanged, with WTI futures settling at $47.06 a barrel. The commodity started the day with a soft tone, easing down to 46.73 before bouncing to set a fresh multi-week high of 47.30. Early Asia, the US will release its API crude stockpiles report, although the EIA one, usually more relevant, has been delayed to Thursday amid the 4th of July holiday. The US benchmark closed for a second consecutive day around the 50% retracement of its latest daily decline between 51.98 and 42.04, maintaining the positive tone in the daily chart, as the price remains well below its 20 DMA, whilst technical indicators hold well-above their mid-lines, losing their upward momentum only due to the ongoing holiday. Shorter term, and according to the 4 hours chart, the risk remains towards the upside, as technical indicators consolidate within overbought territory, whilst the price remains above all of its moving averages, with the 20 SMA accelerating its advance after crossing above the 100 SMA.

Support levels: 46.70 46.10 45.50

Resistance levels: 47.30 48.00 48.70

DJIA

Wall Street remained closed this Tuesday amid the celebration of the 4th of July in the US, with the DJIA latest registered close at 21,479.27. Despite the negative tone of Asian and European equities, the index managed to gain modestly in electronic trading, heading into Wednesday's opening at 21,491. Risk aversion seen early Tuesday seem to have eased, although Asian shares will determinate whether the index can resume its advance during the upcoming session. From a technical point of view, the daily chart for the index shows that it holds above a bullish 20 DMA, and far above the larger ones, while technical indicators stand within positive territory, but with limited upward strength, maintaining the risk towards the upside. In the 4 hours chart, technical indicators have partially corrected from overbought readings before turning flat well above their mid-lines, whilst the index remains far above its moving averages, also supporting some further gains ahead.

Support levels: 21,462 21,420 21,361

Resistance levels: 21,506 21,563 21,600

FTSE100

The FTSE 100 extended its slide by 19 points, and closed the day at 7,357.23, with an advance in the mining-sector limiting risk aversion slides. Worldpay Group out-stood, adding 27.70% after the company confirmed it has been approached by U.S. rival Vantiv about a possible takeover. Among the best performers were Randgold Resources that added 2.01%, and Fresnillo that gained 1.16%. Provident Financial led decliners, ending the day 1.98% lower, followed by Smith & Nephew that shed 1.88%. From a technical point of view, the index has made no progress, still at risk of falling further as an intraday advance was once again rejected by selling interest around the 100 DMA, whilst the 20 DMA extended its decline above the largest, and technical indicators hold within bearish territory, turning south. In the shorter term, and according to the 4 hours chart, a bearish 20 SMA limited advances, now at 7,365, whilst technical indicators hover within negative territory, still lacking directional strength.

Support levels: 7,331 7,294 7,256

Resistance levels: 7,380 7,424 7,452

DAX

European equities closed lower this Tuesday, led by a decline in tech and industrial equities. The German DAX lost 0.31% or 38 points, to end at 12,437.13, with banks mixed, as Deutsche Bank was the best performer, up 1.64%, while Commerzbank led losers' list with a 2.07% decline. Sentiment was dented by news that North Korea launched an intercontinental ballistic missile, claiming that it can hit the US state of Alaska. Activity, however, was limited by US markets being closed on holidays. As for the technical outlook, the daily chart shows that the index held above a bullish 100 DMA, but confined within Monday's range, and with technical indicators flat well-below their mid-lines, limiting chances of a stronger recovery at the time being. In the 4 hours chart, a bearish 20 SMA continues to cap advances, while technical indicators recovered, but remain within negative territory, also limiting the upward potential.

Support levels: 12,420 12,364 12,310

Resistance levels: 12,490 12,536 12,587

AUD/USD – 0.7618

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term up

Original strategy :

Exit long entered at 0.7595

Position: - Long at 0.7595
Target:  -
Stop: -

New strategy :

Sell at 0.7650, Target: 0.7500, Stop: 0.7690

Position: -
Target:  -
Stop:-

Yesterday’s selloff suggests suggests top has possibly been formed at 0.7712 and consolidation with mild downside bias is seen for test of 0.7575-80, however, break there is needed to add credence to this view, bring retracement of recent rise to 0.7535 support, break there would extend further fall towards 0.7500 which is likely to hold from here due to near term oversold condition.  

In view of this, we are looking to sell aussie on recovery as 0.7650 should limit upside. Above 0.7683 resistance would abort and suggest the retreat from 0.7712 has ended instead, bring retest of this level first, then towards 0.7750. 

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

The common currency posted one of its best one-day rally against the U.S. dollar in nearly a year last week. Alongside the gains in the currency, bond prices fell sharply. The reaction came as the European Central Bank president, Mario Draghi signaled that the central bank could begin to wind down its stimulus program.

The hawkish comments from the ECB president come just a few days after the Bundesbank president, Jens Weidmann who also serves on the ECB's governing council signaled his preference for tighter monetary policy.

The surprisingly hawkish remarks from the ECB president Draghi, on the other hand, came just a day after he said that there were risks to prematurely tightening monetary policy. At the time of making the comments, the Eurozone flash inflation estimates were yet to be released.

Any potential policy moves from the ECB towards cutting back the bond purchases will be similar to that of the Fed's tapering. The intention to tighten policy was first executed by winding down the QE before interest rates began to rise.

The ECB's QE was at 80 billion, before being cut to 60 billion in March this year. The next expected cut to QE is likely around September, which will bring the QE purchases to 40 billion. The ECB's bond purchases were expected to run until December 2017 with the potential to extend beyond December if need be.

Draghi at the Economic Policy Conference

Draghi's comments last Tuesday came at the economic policy conference that was hosted in Portugal. Despite the main headline being hawkish, Draghi's speech was full of caution. However, for the market participants, this was the comment that they were waiting for since the ECB's last meeting.

Speaking at the conference, Draghi said, "All the signs now point to a strengthening and broadening recovery in the euro area."

Investors bid the euro higher which rallied as much as 1.4% on the day. It was also the biggest jump seen since June 2016, and the EURUSD closed the day (Tuesday) at $1.1340, after comfortably breaking past the $1.1300 hurdle.

EURUSD reaction to Draghi's comments

There were also rumors from “unknown sources at the ECB' that the market was misinterpreting Draghi's comments. The euro fell but quickly recovered off the $1.130 technical support.

The ECB has been buying eurozone bonds to the tune of 2.3 billion euro. Bond yields rose with prices falling. It also included bonds from Germany and Italy as well.

With the political risks now becoming tailwinds, the path ahead for the ECB is likely to be smooth, provided the current pace of economic recovery is maintained, and inflation shows signs of a pickup.

The ECB's next policy meeting is due in mid-July where the central bank could give out further details on how it intends to taper its bond purchases.

Consumer climate in Germany and France expected to drive growth in the Eurozone

On Thursday, the Gfk's consumer climate data showed a pickup with the upswing in the mood among consumers in Germany. For July, the Gfk's forward looking indicator projected a 0.2 point increase to 10.6, up from 10.4 the month before. The research institute said that its forecast for real private consumer spending would rise 1.5% in 2017.

Gfk German Consumer Climate (July 2017)

Besides the German consumer climate, French consumer mood was also seen rising to the highest levels in nearly 10 years, suggesting that the economic recovery is slowly becoming firmly entrenched.

Eurozone flash inflation estimates

On Friday, the Eurozone's flash inflation estimates were released by the eurozone. The preliminary data on inflation for June showed that headline consumer prices increased 1.3%, while core consumer prices rose 1.1%.

This was higher than the previous month's inflation report which showed headline CPI rising 1.4% and 0.9% a month before.

With the flash inflation estimates more or less validating that inflationary pressures were rising, the ECB could very well be on track with its tightening policy.

EUR/USD

Current level - 1.1353

The bias remains bearish, for a tight test of 1.1290 major support. The latter should provide a reliable base for the next upswing towards 1.1550. Initial intraday resistance lies at 1.1385.

USD/JPY

Current level - 113.19

The pattern below 113.45 is by all means corrective in nature, thus preceding another leg upwards, to 114.30. Initial support lies at 112.60.

GBP/USD

Current level - 1.2919

The minor downtrend from 1.3030 is still intact, heading towards 1.2860 support zone. Initial resistance lies at 1.2960.

Weekly




  


•    Last Candlesticks pattern: Shooting star


   


•    Time of formation: 5 Sep 2016


   


•    Trend bias: Down
 

 


Daily




  


•    Last Candlesticks pattern: Hammer


   


•    Time of formation: 14 Mar 2017


  


•    Trend bias: Near term up


 



 

NZD/USD – 0.6974





As kiwi has eased after marginal rise to 0.7346 earlier this week, suggesting consolidation below this level would be seen and below 0.7250-55 would bring pullback to 0.7200, then towards 0.7171, however, reckon downside would be limited to 0.7100 and bring another rise later. Above said resistance at 0.7346 would extend recent upmove from 0.6818 low to previous resistance at 0.7376, having said that, loss of near term upward momentum should prevent sharp move beyond 0.7400 and price should falter below previous chart resistance at 0.7486.

On the downside, whilst initial pullback to 0.7200-10 cannot be ruled out, reckon downside would be limited to 0.7100 and bring another rise later. A daily close below support at 0.7058-60 would abort and suggest a temporary top is formed, bring weakness to 0.7005-10 but reckon downside would be limited to 0.6985-90 and previous resistance at 0.6950 should remain intact, bring another upmove later. 


Recommendation: Buy at 0.7100 for 0.7300 with stop below 0.7000.

On the weekly chart, although kiwi edged higher this week and bullishness remains for the rise from 0.6818 to extend gain to previous resistance at 0.7376, break of another previous resistance at 0.7403 is needed to confirm early retreat from 0.7486 top has ended there, bring retest of this level later. Looking ahead, kiwi needs to penetrate this level to confirm erratic upmove from 0.6074 (2015 low) has resumed and extend gain to 0.7550 and later towards 0.7680 which is likely to hold from here.

On the downside, although pullback to 0.7200-10 is likely, reckon the Kijun-Sen (now at 0.7097) would limit downside and bring another rise later. Only below support at 0.7035 would suggest top is possibly formed, risk test of 0.7000 but downside should be limited to 0.6950 and bring another rebound later. Below 0.6915-20 would defer and suggest the rebound from 0.6818 has possibly ended instead, risk further fall to 0.6880 first but said recent low at 0.6820 should hold on initial testing.

Weekly
    •    Last Candlesticks pattern: Shooting doji
    •    Time of formation: 20 Feb 2017
    •    Trend bias: Sideways

Daily
    •    Last Candlesticks pattern: Bearish engulfing pattern
    •    Time of formation: 21 Mar 2017
    •    Trend bias: Near term down



As aussie has retreated after rising to 0.7712 late last week, suggesting consolidation below this level would be seen and minor correction to 0.7575-80 is likely, however, reckon downside would be limited to support at 0.7535 and 0.7490-00 would hold and bring another rise later, above 0.7685 would bring retest of 0.7712 but break there is needed to extend recent upmove from 0.7329 low to previous resistance at 0.7750, having said that, only break there would retain bullishness and encourage for headway to 0.7800-10 first.

On the downside, whilst pullback to 0.7575-80 is likely, reckon indicated support at 0.7535 would limit downside and bring another rise later. A daily close below 0.7500 would suggest the rebound from 0.7329 low has ended and bring at least a correction of recent rise to 0.7455-60, then towards 0.7400-10 but support at 0.7372 should remain intact. Looking ahead, only below 0.7372 would revive bearishness and bring retest of 0.7329.



Recommendation: Buy at 0.7510 for 0.7710 with stop below 0.7410.



On the weekly chart, aussie traded with a firm undertone after staging a strong rebound from 0.7329, adding credence to our view that the retreat from 0.7750 has ended at 0.7329 and consolidation with upside bias remains for further gain to 0.7680, however, break there is needed to add credence to this view and bring retest of this level later. Looking ahead, only a break above 0.7750 would another leg of the major rise from 0.6827 low is underway for retest of 0.7778, then towards last year’s high at 0.7835.

On the downside, expect pullback to be limited to 0.7500-10 and bring another rise. Below the Kijun-Sen (now at 0.7458) would prolong consolidation and risk weakness to 0.7410-15 but break of support at 0.7372 is needed to signal the rebound from 0.7329 has ended, bring retest of this level first. A break below there would extend recent decline from 0.7750 to 0.7290-00 and possibly towards 0.7230, however, downside should be limited to 0.7200 and price should stay well above previous support at 0.7158, risk from there is seen for a rebound to take place later. 

USD/CHF - 0.9647

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9644

Kijun-Sen level                    : 0.9641

Ichimoku cloud top                 : 0.9628

Ichimoku cloud bottom              : 0.9606

Original strategy :

Buy at 0.9600, Target: 0.9700, Stop: 0.9565

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9600, Target: 0.9700, Stop: 0.9565

Position : -

Target :  -

Stop : -

As the greenback has maintained a firm undertone after staging a strong rebound from 0.9552 (last week’s low), retaining our view that a temporary low has been formed there and consolidation with mild upside bias is seen for this move to bring retracement of recent decline, hence gain to 0.9667-76 (61.8% Fibonacci retracement of 0.9738-0.9552 and previous support turned resistance) is likely, however, reckon upside would be limited to 0.9700 and price should falter below resistance at 0.9738.

In view of this, we are looking to turn long on pullback as 0.9600 should limit downside and bring another rise later. Below 0.9565-70 would abort and signal intra-day top is formed, risk retest of 0.9552 first.

GBP/USD - 1.2905

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2925

Kijun-Sen level                    : 1.2931

Ichimoku cloud top              : 1.2976

Ichimoku cloud bottom        : 1.2956

Original strategy :

Buy at 1.2865, Target: 1.3000, Stop: 1.2830

Position : - 

Target :  -

Stop : -

New strategy  :

Buy at 1.2865, Target: 1.3000, Stop: 1.2830

Position : -

Target :  -

Stop : -

Although the British pound has remained under near term downward pressure and initial downside risk remains for the corrective fall from 1.3030 (last week’s high) to bring retracement of recent upmove to 1.2880-85 (38.2% Fibonacci retracement of 1.2640-1.3030), reckon downside would be limited to 1.2865-70 and bring another upmove later, above 1.2960 would signal low is formed, bring rebound to 1.3000 but break of said resistance at 1.3030 is needed to signal recent upmove has resumed and extend further gain towards recent high 1.3048. 

In view of this, we are looking to buy cable again on further corrective fall as previous resistance at 1.2861 should turn into support and contain downside, bring another rise. Below 1.2830-35 (50% Fibonacci retracement of 1.2640-1.3030) would abort and signal top is formed, bring further fall towards support at 1.2794.

EUR/USD - 1.1366

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1359

Kijun-Sen level                  : 1.1357

Ichimoku cloud top             : 1.1390

Ichimoku cloud bottom      : 1.1366

Original strategy  :

Buy at 1.1300, Target: 1.1400, Stop: 1.1265

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1300, Target: 1.1400, Stop: 1.1265

Position : -

Target :  -

Stop : -

The single currency met strong resistance at 1.1445 last week and has retreated since, suggesting initial downside risk remains for retracement of recent upmove to 1.1325-30 (38.2% Fibonacci retracement of 1.1139-1.1446), however, reckon support at 1.1292 (as well as 50% Fibonacci retracement) would hold and bring another rise, above 1.1400-10 would bring retest of said resistance at 1.1446, break there would extend recent rise to 1.1455-60 (61.8% projection of 1.1119-1.1389 measuring from 1.1292), then 1.1480.

In view of this, would not chase this rise here and would be prudent to buy euro on pullback as 1.1292 (previous support as well as 50% Fibonacci retracement of 1.1139-1.1446) should limit downside, bring rebound. Below 1.1270 would abort and signal a temporary top is formed, bring correction to 1.1250-55 first.

Daily Pivots: (S1) 145.91; (P) 146.38; (R1) 146.78; More....

With 145.13 minor support intact, further rise is expected in GBP/JPY to 148.09/42 resistance. Decisive break there will extend whole rally from 122.36 to long term fibonacci level at 150.43 next. On the downside, below 145.13 minor support will turn intraday bias neutral and bring consolidation again before staging another rally.

In the bigger picture, rise from medium term bottom at 122.36 is expected to continue to 38.2% retracement of 196.85 to 122.36 at 150.43. Decisive break there will carry long term bullish implications and pave the way to 61.8% retracement at 167.78. In case the sideway pattern from 148.42 extends, we'd be looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside.