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The Pound Sterling edged lower by 45 pips or 0.32% against the US Dollar on Monday. The GBP/USD currency pair tested the weekly S1 at 1.3838 on Tuesday morning.

Technical indicators suggest selling signals on the 4H time-frame chart. Most likely, the exchange rate could continue to edge lower during the following trading session.

However, the weekly support level at 1.3838 could still provide support for the currency exchange rate within this session.

On Monday, the Eurozone single currency declined by 32 pips or 0.27% against the US Dollar. The exchange rate tested a four-month low at 1.1730 during Monday's trading session.

By and large, the currency pair is likely to continue to edge lower in a descending channel pattern during the following trading session. The possible target for the EUR/USD pair will be near 1.1680.

However, the currency exchange rate might encounter support near the weekly S1 at 1.1712 within this session.

Daily Pivots: (S1) 129.33; (P) 129.56; (R1) 129.74; More....

EUR/JPY's consolidation from 128.58 is extending and intraday bias remains neutral first. Outlook stays bearish with 131.07 resistance intact. On the downside, break of 128.85 will resume the fall from 134.11 to 127.07 resistance turned support next. On the upside, break of 131.07 resistance will argue that choppy fall from 134.11 has completed. Intraday bias will be turned back to the upside for 132.68 resistance first.

In the bigger picture, rise from 114.42 is seen as a medium term rising leg inside a long term sideway pattern. As long as 127.07 resistance turned support holds, further rise is still expected to retest 137.49 (2018 high). However, firm break of 127.07 will argue that the medium term trend has reversed, and open up the case for retesting 114.42.

Daily Pivots: (S1) 0.8463; (P) 0.8474; (R1) 0.8488; More...

No change in EUR/GBP's outlook as intraday bias stays on the downside, with focus on 0.8470 low. Decisive break there will resume larger fall from 0.9499, towards next key support at 0.8276. On the upside, break of 0.8556 will indicate short term bottoming and turn bias back to the upside for strong rebound.

In the bigger picture, price actions from 0.9499 are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8718 resistance holds. Firm break of 0.8470 will target long term support at 0.8276. However, firm break of 0.8718 would argue that a medium term bottom was already formed. Stronger rise would be seen to 0.8861 support turned resistance to confirm completion of the corrective pattern.

Daily Pivots: (S1) 1.5983; (P) 1.6004; (R1) 1.6032; More...

Intraday bias in EUR/AUD remains neutral first, but further rise is expected with 1.5925 support intact. 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) 1.0772; (P) 1.0788; (R1) 1.0821; More....

Intraday bias in EUR/CHF remains neutral first with focus on 1.0802 support turned resistance. Rejection by this resistance will maintain near term bearishness. Break of 1.0715 will resume larger fall from 1.1149 to retest 1.0505 low. On the upside, though, break of 1.0802 will indicate short term bottoming and bring stronger rebound to 55 day EMA (now at 1.0856).

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.

Markets

US Treasuries extended last week’s underperformance. A very strong non-manufacturing ISM and a near 1mn payrolls print prompted profit taking after a two month breath-taking rally. The move was driven by significantly higher US real rates, prompting a scare in for example gold prices. Bullion fell off a cliff in Asian dealings, testing the March/April lows subs $1700/ounce while still trading above $1850 last Wednesday. Some hawkish Fed comments added to yesterday’s weakness in US Treasuries, together with anticipation on another 5%+ US CPI print (on Wednesday) and on the US Treasury’s mid-month refinancing operation which features 10y and 30y sales on Wednesday and on Thursday. The US Senate will normally this week also pass a $1tn infrastructure package with significant Republican support. Returning briefly to the Fed: non-voting Boston governor Rosengren called for the start of tapering at the September meeting while voting Atlanta Fed governor Bostic called for tapering to start sooner than earlier expected with the scale of the reduction being larger than in previous episodes. He foresees a first rate hike very late 2022, implying a 2021 tapering start. The Jackson Hole meeting of August 26-28 will be a very hyped event! US yield eventually added 1.1 bp (2-yr) to 2.8 bps (7-yr) on a daily basis. The German yield curve flattened with yield changes varying between +0.8 bps (2-yr) and -0.9 bps (30-yr). The dollar enjoyed the higher US (real) rates) and reached its strongest level against the euro since early April. A EUR/USD 1.1737 close brings the YTD low of 1.1704 within striking distance. The Fed build-up, US CPI and upcoming supply all suggest that a test will be unavoidable. We expect US Treasury weakness and dollar strength to last today even if the eco calendar isn’t that enticing.

Sterling for a second straight session attempted a break below the YTD low of EUR/GBP 0.8472. A sustained move below paves the way for the 2019 bottom at 0.8277. The August Bank of England meeting triggered the latest sterling rally last week. The UK central bank unexpectedly adapted its forward guidance. For the past year, it sounded that the BoE would not even consider tightening policy “until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably”. Actual inflation developments and another bump in inflation projections in the August Monetary Policy Report prompted a change to “some modest tightening of monetary policy over the forecast period ahead is likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term”. The hawkish shift in forward guidance was accompanied by detailed plans on how the unwinding of the balance sheet process would work. The BoE marked a policy rate level of 0.5% as threshold to stop reinvesting proceeds from maturing bonds of the £895bn QE bond portfolio. Previously, the BoE expected this process to stop at a policy rate level of 1.5%. The latter now serves as a cue to start additional portfolio selling. The Bank of England is now a clear market favorite to kick off G4 policy normalization. A first 15 bps rate hike is discounted by March 2022. This week’s highlight on the UK eco calendar is Thursday’s Q2 GDP release.

News headlines

US unfilled job openings rose more than expected in June, from 9.48 million to 10.07 million to another record high. The Labor Department said that the increase was driven by accommodation and food services, retail and professional and business services, in another sign that the easing of pandemic restrictions translates into broader economic activity. The gap between job openings and people who are unemployed (9.5 million) is positive since May and continues to rise. The quits rate, which indicates how fast people leave their jobs and is seen as a proxy for confidence in the labour market, ticked up to 2.7%, just below the all-time high of 2.8%.

Daily Pivots: (S1) 1.1724; (P) 1.1747; (R1) 1.1758; More...

Intraday bias in EUR/USD stays on the downside, as fall from 1.2265 is in progress to 1.1602/1703 support zone. We'd expect strong support from there to bring rebound. But break of 1.1907 resistance is needed to confirm short term bottoming. Meanwhile, sustained break of 1.1602 will argue that it's already reversing the trend from 1.1603, and target 61.8% retracement of 1.1603 to 1.2348 at 1.1888.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. Reaction from 1.2555 should reveal underlying long term momentum in the pair. However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again.

Daily Pivots: (S1) 1.3826; (P) 1.3861; (R1) 1.3880; More...

Intraday bias in GBP/USD remains neutral as consolidation from 1.3982 is extending. Outlook is unchanged that corrective pattern from 1.4240 could have completed with three waves down to 1.3570. On the upside, break of 1.3982 will resume the rise from 1.3570 to retest 1.4248 high. However, break of 1.3766 support will dampen this bullish view and bring retest of 1.3570.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed. GBP/USD would then be seen in another leg of long term range pattern between 1.1409 and 1.4376. Deeper fall could then be seen to 61.8% retracement of 1.1409 to 1.4248 at 1.2493, and even below.

Daily Pivots: (S1) 0.9161; (P) 0.9184; (R1) 0.9230; More....

USD/CHF's rise from 0.9017 is still in progress and intraday bias stays mildly on the upside for retesting 0.9273 resistance. Break there will resume rise from 0.8925 to 100% projection of 0.8925 to 0.9273 from 0.9017 at 0.9365. On the downside, below 0.9128 minor support will mixed up the outlook and turn intraday bias neutral first.

In the bigger picture, the failure to sustain above 55 week EMA (now at 0.9183) retains medium term bearish in USD/CHF. Break of 0.8925 support should resume the whole decline form 1.0342 (2016 high) through 0.8756 low. However, break of 0.9273 resistance and sustained trading above 55 week EMA will be an early sign of bullish trend reversal. Focus will then turn to 0.9471 resistance for confirmation.