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Daily Pivots: (S1) 0.8454; (P) 0.8467; (R1) 0.8484; More...

EUR/GBP's break of 0.8470 support indicates resumption of whole fall from 0.9799. Intraday bias stays on the downside. Deeper fall would be seen to long term key support level at 0.8276 next. On the upside, break of 0.8556 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, price actions from 0.9499 are still seen as developing into a corrective pattern. Further decline is expected as long as 0.8668 resistance holds, to retest long term support at 0.8276. We'd look for strong support from there to bring rebound. On the upside, firm break of 0.8668 resistance would now be the first sign of medium term bullish reversal.

EUR/USD

Current level - 1.1719

Bear pressure continues to sink the euro and the US dollar remains strong against most major currencies. Sellers slowed down around the 1.1711 support, with no significant presence of buyers on the market. Expectations are for a pullback phase of the market which should be limited by the resistance 1.1766. If 1.1711 support is breached, the sell-off could deepen to 1.1600. Today, traders will expect data on the consumer price index for the United States at 12:30 GMT. Assumptions are that inflation has peaked, but if we see another rise, investors may see this as a possibility for a rate hike and a stronger dollar in the aftermath.

USD/JPY

Current level - 110.61

The strong rally for the US dollar against the yen managed to take the pair over the high at 110.56. The area has not yet been confirmed as support and the first one is at 110.30. The expectations are for a slowdown in the trend and indecision in the market at least until the announcement of the data mentioned in the EUR/USD analysis. Should the rally continue, an attack at the top of July at 111.51 can be expected. On the other hand, the entry of bears can plunge the pair to the beginning of the momentum around 108.74.

GBP/USD

Current level - 1.3824

There is a reversal of the trend of the analysed time frame. If support at 1.3827 is broken, declines to the next zone at 1.3776 and even 1.3720 can be expected. A jump in prices above the resistance of 1.3862 will be an early signal that the bulls are still on the market. In this scenario, they would try to attack the high at 1.3979 again.

Daily Pivots: (S1) 1.5909; (P) 1.5973; (R1) 1.6015; More...

Intraday bias in EUR/AUD stays neutral and outlook is unchanged. With 1.5925 support intact, further rise is still expected. On the upside, break of 1.6182 will resume the rise from 1.5250 to 1.6827 resistance next. However, on the downside, firm break of 1.5925 will bring deeper fall back to 1.5614 structural support instead.

In the bigger picture, a medium term bottom was formed at 1.5250, on bullish convergence condition in daily MACD. Rise from 1.5250 is currently seen as a correction to the down trend from 1.9799 first. Stronger rise would be seen to 38.2% retracement of 1.9799 to 1.5250 at 1.6988 next. We'd tentatively expect strong resistance from there to limit upside, at least on first attempt. Meanwhile, break of 1.5614 support will indicate that the rebound has completed and bring retest of 1.5250 low.

Daily Pivots: (S1) 1.0801; (P) 1.0810; (R1) 1.0825; More....

Intraday bias in EUR/CHF remains on the upside at this point. Rebound from 1.0715 is in progress for 38.2% retracement of 1.1149 to 1.0715 at 1.0881. We'd monitor the reaction to 1.0881 to assess the chance of bullish reversal. On the downside, break of 1.0788 minor support will turn bias back to the downside for retesting 1.0715 low instead.

In the bigger picture, rebound from 1.0505 (2020 low) should have completed at 1.1149 already. The three wave corrective structure argues that the downtrend from 1.2004 (2018 high) is not over yet. Medium term outlook will now stay bearish as long as 1.1149 resistance holds. Break of 1.0505 low would be seen at a later stage.

On Tuesday, the common European currency fell by 28 pips or 0.24% against the US Dollar. The currency pair tested the weekly S1 at 1.1712 during Tuesday's trading session.

Currently, the EUR/USD exchange rate is trading near the upper boundary of a descending channel pattern and could be set for a breakout.

If the breakout occurs, a surge towards the resistance level at 1.1776 could be expected within this session.

However, if the channel pattern holds, the currency exchange rate would continue to trend lower in the descending channel during the following trading session.

The British Pound has declined by 38 pips or 0.27% against the US Dollar on Tuesday. The currency pair was pressured lower by the 55– hour simple moving average during Tuesday' trading session.

All things being equal, the exchange rate could continue to trend lower in a descending channel pattern during the following trading session. The potential target for sellers would be near the 1.3780 area.

However, bearish traders might encounter support near the weekly S2 at 1.3819 within this session.

On Tuesday, the US Dollar surged by 30 pips or 0.27% against the Japanese Yen. The currency pair was guided by the 55– hour simple moving average during Tuesday's trading session.

Given that the 55–, 100– and 200– hour SMAs are below the price level, buyers could continue to pressure the USD/JPY exchange rate higher during the following trading session.

However, the currency exchange rate could encounter resistance at 110.84 within this session.

On Tuesday, the XAU/USD exchange rate edged lower by 148 pips or 0.85%. The commodity traded above the 1720.0 level during Tuesday's trading session.

As for the near future, the yellow metal's price could continue to fall within the following trading session. The possible target for bearish traders will be near the 1680.00 area.

However, if the precious metal breaks the 55– hour simple moving average resistance level at 1735.5, a surge towards the 1780.00 level could be expected within this session.

Technical analysis

The Ichimoku indicator gives a possible bullish signal

The RSI is above line 50, indicating that an uptrend may prevail.

What the possible outcomes are

XAUUSD traded around 1,730 as gold was trying to recover after the sharp fall on Monday. The precious metal came under pressure after surprisingly positive Nonfarm data. The U.S. dollar gains spurred by tapering talk, which is bad for gold.

In our most likely scenario, XAUUSD may rise towards the first resistance level of 1,748.

If the pair surpasses the first resistance level, we should expect a continued surge towards the second resistance level of 1,758.

Contrarily, the pair may initially decline towards the first support level of 1,733.

If the pair falls below the first support level, we can expect a continued downtrend towards the second support level of 1,723.

Key levels

Support 1,723 1,733

Resistance 1,748 1,758 1,769

Markets

Both the dollar and sterling held their advantage over the single currency yesterday even if last week’s intense trading dynamics slowed. EUR/USD came within a whisker of the 1.1704 YTD low, but a real test didn’t occur yet. A break below the zone 1.1695/1.1704 would be highly relevant with the former being 38% retracement on the 2020 EUR/USD rally. Next support stands at 1.1603 (Sep/Nov 2020 dip) and 1.1493 (50% retracement). Today could already be the day for USD with July CPI inflation readings scheduled for release. Consensus expects more or less stabilization for both the headline number (5.3% Y/Y from 5.4% Y/Y) and the core reading (4.3% Y/Y from 4.5% Y/Y). 5%+ inflation prints in previous cycles triggered heavy selling in both bonds and stocks as they awakened the inflation bogeyman. The damage for bonds remained very much contained in May (5%) and especially June (5.4%) against the background of a stellar bond bull run. Things might be different this time around though as a very strong non-manufacturing ISM and payrolls managed to trigger profit-taking on US Treasuries. Especially a CPI beat wouldn’t go unnoticed. Theory at this stage of the cycle suggest a bear steepening as a market reaction, though over the past months we noticed markets already shifting into a bear flattening mode. We are eager to find out if that remains the case after the significant setback in (LT) US yields over the course of June & July. US Treasuries yesterday in any case continued to underperform German Bunds. US yields added 1.8 bps (2-yr) to 3.1 bps (5-yr) in a daily basis. The US 10-yr yield passed a first important technical mark by moving north of 1.32%. This ends the downtrend in place since mid-May. German yields ended only 0.2 bps to 0.4 bps higher on the day. The dollar is one of the main beneficiaries as mentioned above and will take a swing at the 1.17 big figure which is clearly at high risk of a break lower. Chicago Fed Evans argued that it’s too soon to take a tapering decision and wants to see some additional labour market reports. He did add that it’s only a question of months with the call to be made ahead of the end of the year. Evans is on the dovish side of the aisle which risks being outnumbered by the September FOMC meeting. Other eyecatchers yesterday included a solid 3-yr Note sale to kickstart the Treasury’s mid-month refinancing operation and the anticipated acceptance of the infrastructure spending bill by US Senate (see below). The former preludes probably tougher 10y Note and 30y Bond sales today and tomorrow while the latter still managed to push the S&P and Dow to fresh all-time highs. Asian stock markets trade more mixed this morning with Japan outperforming.

EUR/GBP narrowly closed below the previous YTD low (0.8472), briefly touching 0.8450 for the first time since March last year. A sustained break by the end of the week paves the way to the 2019 low of EUR/GBP 0.8277 with a front-running Bank of England being the key driver. Today’s UK eco calendar is empty with UK investors eyeing tomorrow’s Q2 GDP print.

News headlines

US President Biden scored an important win after the US Senate yesterday overwhelmingly passed a roughly $1tn infrastructure package with broad bipartisan support. All Democrats in the split Senate voted in favour with 19 Republicans joining them, resulting in a 69-30 vote. The WSJ reports that the package includes $550bn in spending above previously projected federal levels: $110bn would go toward roads and bridges, $66bn to rail, nearly $40bn to transit, and $65bn to expand access to broadband. Budgets are also made available to avoid the worst consequences of climate change and becoming more resilient to cyberattacks. The infrastructure bill now moves to the Democratic-led House, where speaker Pelosi threatened to delay taking up the issue until the Senate also passes Biden’s $3.5tn antipoverty and climate plan.