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The EUR/USD pair experienced a noticeable uptick yesterday, but failed to sustain its peak, settling at 1.0732 today. Early gains were buoyed by the initial outcomes from France's parliamentary elections, which did not reflect the worst-case scenario, sparking a temporary surge in risk appetite and bolstering the euro.

However, last evening's economic indicators from the U.S. painted a mixed picture, dampening the initial enthusiasm. The ISM Manufacturing Index for June dipped to 48.5 from 48.7, falling short of expectations and remaining below the pivotal 50-point mark that delineates expansion from contraction. Conversely, Markit's Manufacturing PMI indicated a slight improvement, rising to 51.6 from 51.3.

Additionally, a report showed a 0.1% month-on-month decline in U.S. construction spending for May, a reversal from the previous increase of 0.3% and weaker than anticipated, suggesting a potential slowdown in the construction sector and broader economic support.

Market participants are now turning their attention to an upcoming speech by Jerome Powell, Chair of the Federal Reserve, for further clues on the direction of U.S. monetary policy.

Technical analysis of EUR/USD

The EUR/USD pair completed a correction to 1.0774 but is now forming a declining wave towards 1.0675. Should this level be reached, a minor correction to 1.0714 may occur before a potential further drop to 1.0630, and potentially extending down to 1.0573. The MACD indicator underlines this bearish outlook with its signal line positioned below zero and histograms trending downwards.

On the hourly chart, the pair is currently crafting a declining structure with an initial target at 1.0675. Following this, a correction towards 1.0714 is plausible, before a continuation of the downtrend to 1.0640. The Stochastic oscillator corroborates this view, with its signal line approaching the 20 level, indicating a potential for further declines before a rebound towards 50 might occur.

Market outlook

Investors will continue to assess the blend of economic data and central bank signals, particularly from the Fed, to gauge the potential trajectory of interest rates and their impact on currency valuations. Today's speech by Jerome Powell could be particularly pivotal in setting market expectations moving forward.

European currencies are showing surprising resilience. Despite the general strengthening of the dollar and strong macroeconomic data from the US, EUR/USD and GBP/USD continue to trade above strategically important levels:

• EUR/USD has been testing 1.0660 for over three weeks but cannot establish itself below this level.
• GBP/USD buyers have been holding off sellers for a second week at the 1.2610-1.2600 level.

EUR/USD

The recent parliamentary elections in France, with the first round concluding last Sunday, have contributed to a slight strengthening of the euro. The pair opened with a small price gap and managed to strengthen by over 60 pips within a few hours. Experts attribute the rise in the single European currency to the possibility that Le Pen's far-right party might outpace President Emmanuel Macron's centrist alliance and the left-wing "New People's Front" with fewer votes than needed for an absolute majority after the second and final round of voting.

Technical analysis of the EUR/USD pair indicates continued range-bound trading between 1.0760-1.0660. A breakout and consolidation above 1.0760 could lead to a renewed rise towards 1.0900-1.0850. Breaking the three-week support at 1.0660 could result in a retest of the April low this year at 1.0590.

Events that could impact the pair's pricing include:

• Today at 12:00 (GMT+3): Eurozone core Consumer Price Index (CPI) for June
• Today at 13:30 (GMT+3): Speech by European Central Bank (ECB) representative Elizabeth Schnabel
• Today at 16:30 (GMT+3): Speech by US Federal Reserve Chairman Jerome Powell

GBP/USD

For the second week, the GBP/USD currency pair is trading within a relatively narrow 100-pip range, which is unusual for it. Yesterday, the price surged sharply to 1.2700 but just as sharply fell, closing the day with a candle featuring a long upper shadow, which may indicate weakness among pound buyers. According to technical analysis of the GBP/USD pair, a break below 1.2600 could renew the downward trend towards 1.2560-1.2450. The bearish scenario could be nullified if the price confidently consolidates above 1.2700.

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• EURJPY advances above 32-year high
• Fears of a Japanese intervention increase
• Oscillators point to overbought conditions

EURJPY has been in an uptrend since the beginning of the year, storming to consecutive multi-year highs. Despite a strong pullback following a currency intervention from Japan in late April, the market has been steadily moving higher above levels that the Japanese authorities were willing to protect.

Should the upward trajectory resume, the pair could meet resistance at psychological levels such as 175.00 or 180.00 last observed in 1992.

On the flipside, if the pair experiences a pullback, initial support could be found at the April peak of 171.56. Lower, the June support of 167.50 could prevent further declines. A break below that zone could trigger a retreat towards 165.34 ahead of 164.28, two previous resistance regions that could serve as support in the future.

In brief, EURJPY has been on the rise, constantly defying overbought signals. Will the Japanese side intervene?

ECB Chief Economist Philip Lane emphasized today that June inflation data alone will not suffice to address questions surrounding services inflation, suggesting the ECB may delay further interest rate cuts until additional data is available.

Lane noted, "The key is really services inflation. What we've seen in the last days is that services inflation remains the outlier, and what we need to see is whether higher services inflation is a backward element and is a legacy of the rapid disinflation or is it a persistent element. We need time to work on it."

On the political front, Lane downplayed concerns about France's recent political turmoil impacting markets significantly, stating, "It is clearly natural in an election for the market to reprice. There are elections all the time, there are movements in spreads all the time. Of course, France is an important country, but this looks like an ordinary repricing to me."

Other ECB Governing Council members also shared their perspectives at the ECB forum. Lithuania's Gediminas Simkus aligned with expectations for further rate cuts, stating, "Expectations for two more cuts this year are in line with my own thinking, if data evolve as expected." Similarly, Belgium's Pierre Wunsch remarked, "The first two rate cuts are relatively easy as long as inflation hovers around 2.5% because we will still clearly be restrictive."

Daily Pivots: (S1) 203.45; (P) 204.09; (R1) 204.93; More...

Intraday bias in GBP/JPY remains on the upside for the moment. Current up trend should target 100% projection of 191.34 to 200.72 from 197.18 at 206.56 next. On the downside, below 202.55 minor support will turn intraday bias neutral and bring consolidations. But outlook will remain bullish as long as 200.72 resistance turned support holds, in case of retreat.

In the bigger picture, long term up trend is still in progress. Next target is 100% projection of 155.33 to 188.63 from 178.32 at 211.62. Outlook will stay bullish as long as 197.18 support holds, even in case of deep pullback.

Daily Pivots: (S1) 172.78; (P) 173.22; (R1) 173.85; More...

Intraday bias in EUR/JPY remains on the upside. Current up trend should target 100% projection of 164.01 to 170.87 from 167.52 at 174.38. On the downside, below 171.36 minor support will turn intraday bias neutral and bring consolidations first. But outlook will remain bullish as long as 170.87 resistance turned support holds.

In the bigger picture, long term up trend is still in progress. Next target is 100% projection of 139.05 to 164.29 from 153.15 at 178.38. For now outlook will stay bullish as long as 167.52 support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8475; (P) 0.8487; (R1) 0.8502; More...

Intraday bias in EUR/GBP remains on the upside at this point. Sustained trading above 55 D EMA (now at 0.8501) will extend the rise from 0.8396 short term bottom to 0.8529 support turned resistance. On the downside, break of 0.8493 support will bring retest of 0.8396 low instead.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Break of 0.8396 will target 0.8201 (2022 low). For now, outlook will remain bearish as long as 0.8643 resistance holds, even in case of stronger rebound.

Daily Pivots: (S1) 1.6085; (P) 1.6117; (R1) 1.6159; More...

Intraday bias in EUR/AUD stays neutral as consolidations continue above 1.5996. Outlook stays bearish as long as 1.6211 support turned resistance holds. On the downside, break of 1.5996 will target 100% projection of 1.6679 to 1.6211 from 1.6418 at 1.5950. Firm break there will target 1.5846 key support next.

In the bigger picture, fall from 1.7062 medium term top is seen as a correction to the up trend from 1.4281 (2022 low) only. Strong support is still expected between 1.5846 and 38.2% retracement of 1.4281 to 1.7062 at 1.6000 to bring rebound. Break of 1.6148 resistance will argue that the correction has completed.

Daily Pivots: (S1) 0.9656; (P) 0.9683; (R1) 0.9723; More....

EUR/CHF's break of 0.9683 resistance argues that fall from 0.9928 has completed at 0.9476, probably as a corrective move. Intraday bias is back on the upside for retesting 0.9928 high. On the downside, however, break of 0.9608 will bring retest of 0.9476 support instead.

In the bigger picture, rebound from 0.9252 medium term bottom might not be completed yet. But even in case of resumption, strong resistance could emerge from 1.0095 to limit upside. Medium term outlook will be neutral at best as long as 1.0094 structural resistance holds. Meanwhile, break of 0.9476 will bring retest of 0.9252 low.

• GBPUSD’s recent bounce off 1.2300 runs out of steam
• RSI and MACD hold beneath mid-levels

GBPUSD started a bearish wave again after the spike towards the three-month high of 1.2860, sending prices beneath the 20- and 50-day simple moving averages (SMAs). The market is ready to retest the midpoint of the long-term trading range at 1.2610.

Short-term momentum indicators are also pointing to a continuation of the bearish bias. The RSI is still developing beneath its downtrend line and the neutral threshold of 50, while the MACD is standing beneath its trigger and zero lines with weak momentum.

Further losses should see the immediate 1.2610 support ahead of the 200-day simple moving average (SMA) at 1.2570. A drop lower could take the bears until the 1.2465 region, ahead of the lower boundary of the range at 1.2300.

In the event of an upside reversal, the 20-day SMA is the first resistance to focus on before hitting the 1.2740 resistance. A break above this level, the pair could retest the upper boundary of the sideways channel at 1.2820.

To sum up, GBPUSD has been in a trading range since mid-November and in the very short term is looking bearish.