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The British Pound edged higher by 104 pips or 0.69% against the Japanese Yen on Monday. The currency pair was pressured higher by the 50– hour simple moving average during yesterday's trading session.

By and large, bullish traders are likely to continue to drive the exchange rate higher during Tuesday's trading session. The possible target for the GBP/JPY pair will be near the 153.50 level.

However, the currency exchange rate might encounter a barrier near the 152.50 area within this session.

The EUR/JPY currency pair bounced off a support level formed by the 200– hour simple moving average at 129.77 on Monday. As a result, the European single currency surged by 51 pips or 0.40% against the Japanese Yen during Monday's trading session.

All things being equal, the exchange rate could continue to edge higher during the following trading session. The potential target for buyers will be near the weekly resistance level at 130.72.

However, the resistance line at 130.32 could still provide resistance for the currency exchange rate within this session.

The Australian Dollar edged higher by 51 pips or 0.69% against the US Dollar on Monday. The surge was stopped by the 200– hour simple moving average during Monday's trading session.

Everything being equal, the exchange rate could continue to edge higher during the following trading session. The potential target for bullish traders will be near the 0.7440 area.

However, the resistance level at 0.7400 could provide resistance for the AUD/USD currency exchange rate within this session.

The USD/JPY has revealed that it respects the resistance of the 110.40 level. Meanwhile, support appears to be provided by the 110.10 level and the 100-hour simple moving average. However, on Tuesday morning, the support of the simple moving average was passed.

In the case that the rate surges, the rate would have to pass the 110.40 level before encountering the July 23 high level at 110.60. Take into account that other July high levels are also located at round exchange rate levels. Namely, July 14 high is at 110.70 and the July 7 high is at 110.80.

However, a potential decline of the pair would find support in the 110.00 mark, the weekly simple pivot point at 110.09 and the 200-hour simple pivot point at 110.05.

The surge, which followed the GBP/USD breaking the channel down pattern and the resistance of the 1.3800 mark, has found resistance. Namely, since the middle of Monday's trading hours, the pair has been fluctuating sideways below the weekly R1 simple pivot point at 1.3835.

If the pair breaks the resistance of the pivot point, it could reach for the resistance zone that surrounds the 1.3900 mark. The zone consists of July high levels. In the case of the zone being passed, most likely the weekly R2 simple pivot point at 1.3919 would provide resistance.

Meanwhile, a potential decline would most likely look for support in the 1.3800 mark. Below the 1.3800 level, the hourly simple moving averages could provide additional support.

The EUR/USD currency exchange rate has reached above the 1.1800 mark. On Tuesday morning, the pair traded in the range between the 1.1800 and 1.1810 levels.

In the case of a surge, the pair would most likely face the resistance of the weekly R1 simple pivot point at 1.1819 and the late July high level zone at 1.1821/1.1823. Above these levels, the 1.150 could provide resistance before the pair reaches the weekly R2 simple pivot point at 1.1864.

On the other hand, a decline of the pair would look for support in the 1.1800 mark, the 200-hour SMA near 1.1793 and the cluster of support levels near 1.1785. At the 1.1785 mark, the rate could be supported by the 55 and 100-hour simple moving averages and the weekly simple pivot point.

The Pound Sterling fell by 1.20% against the Canadian Dollar last week. The decline was stopped by the 200– period simple moving average at 1.7215 during last week's trading sessions.

All things being equal, the exchange rate could continue to edge lower. A breakout through the lower line of an ascending channel pattern could occur within the following trading sessions.

However, the 200– period SMA at 1.7215 could provide support for the currency exchange rate this week.

The GBP/AUD currency pair bounced off a support level formed by the 50– period simple moving average at 1.8564 on July 20. As a result, the British Pound has surged by 175 pips or 0.95% against the Australian Dollar since last week's trading sessions.

The exchange rate is currently trading near the upper line of an ascending channel pattern and could be set for a breakout.

If the breakout occurs, a surge towards the weekly R3 at 1.8870 could be expected during the following trading sessions.

However, if the channel pattern holds, bearish traders could drive the currency exchange rate lower during the coming days.

EUR/USD

Current level - 1.1802

Last week, neither the bears nor the bulls gained enough momentum to successfully violate either border of the range between 1.1759 and 1.1805. During the early hours of today`s trading, the pair is hovering just above the level at 1.1759 and a new test is the most probable scenario. A breach here would strengthen the negative expectations for the future path of the EUR/USD and would easily deepen the sell-off towards the support level at 1.1717. The first target for the buyers is still the level of 1.1805, followed by the resistance zone at 1.1850. This week, investors’ attention will be focused on the consumer confidence data for the U.S. (Tuesday; 14:00 GMT), the announcement of the Fed’s Interest Rate Decision (Wednesday; 18:00 GMT), and the data for the unemployment claims (Thursday; 12:30 GMT).

USD/JPY

Current level - 110.18

Market participants still cannot take a clear position as the currency pair is looking to form a narrow range between 109.50 - 110.60. A breach of either boundary of the range could give market participants the incentive necessary to steer the pair in a clearer direction.

GBP/USD

Current level - 1.3818

The pound continues to regain the lost ground against the U.S. dollar and, at the time of writing the analysis, it is trading just above the resistance zone at 1.3800. If this breach is confirmed, this could pave the way for an attack on the next resistance zone at 1.3894. This, in turn, could lead to a resumption of the upward movement towards the first significant resistance at 1.4000, and then towards the local highs at around 1.4200. In the negative direction, the main support remains 1.3739.

Markets

The outcome in key markets yesterday wasn’t that different from Friday. US and European yields were a little higher. Changes in the broader US and European equities were negligible. Admittedly, for US indices this still translated in record closing levels. The dollar lost a few ticks. This looked like the standard outcome of an uneventful start of the week. However, the set-up in Asia and early in Europe suggested something different. Unexpected and deep regulatory changes in the China education tech sector stupefied investors as they realized that Chinese authorities can change the rules of the game at any time. The subsequent equity sell-off rolled over into the European session. The German Ifo business confidence missing market expectations didn’t help. Of late, markets mostly were more sensitive to negative news rather than to better than expected data. However, after substantial initial losses, yields and equites overcame the negative narrative. German yields closed little changed. German 10-y yield intra-day hit a 5 month low, but the -0.42%/-0.47% support survived. Similar story on the US bond markets. The US 10-y real yield intraday reached a new all-time low, but in the end the US curve bear steepened with the 10 and 30-y yield rising 1.3 and 2.7 bp respectively. The jury (and the Fed) is still out, but we look out whether this could be a harbinger of a tentative bottoming in core yields. At the same time, a $ 60 bln US Treasury auction of 2-y notes met solid investor demand. The easing of market stress also caused modest USD profit taking. EUR/USD closed just north of 1.18. Interesting, despite recent uncertainty on growth, global commodity indices have resumed their uptrend. The CRB index yesterday reached a post corona peak supporting a rebound in inflation expectations.

This morning, Asian equities show a mixed picture with China still underperforming. Chinese industrial profits slowed further from 36.4Y/Y in May to 20.0 Y/Y. Base effects are in play, but the report also suggests some easing in activity. The yuan is trading marginally stronger at USD/CNY 6.479. LT US yields are up to 1 bp lower. The dollar is little changed to marginally weaker (DXY 92.62; EUR/USD 1.180; USD/JPY 110.20).

Today’s data include US durable goods orders, US housing price data and Consumer confidence from the conference board. As such, the data for sure contain some potentially viable info. However, a real directional reaction probably will be difficult as investors are counting down to tomorrow’s Fed policy announcement. On the Equity markets several US bellwethers (including 3M, Visa, Alphabet, Microsoft & Apple) will publish Q2 results. The US Treasury will sales $61 of 5-year Notes.

Yesterday’s price pattern was a bit mixed/puzzling. US and European markets overcame a negative start. At the same time, real yields remain under pressure. Are markets positioning for the Fed to keep a rather soft bias? Even so, especially on European interest rate markets we look out whether some bottoming might be in store. -0.47% remains first point of reference for the German 10-y yield. -0.09%/-0.14% is important support for the euro 10-y swap. The dollar recently also showed tentative signs of topping out (or at least taking a breather). This process might continue going into tomorrow’s Fed meeting. EUR/USD 1.1881/1.1895 is first ST technical resistance, but a test is unlikely before the Fed meeting. Sterling (EUR/GBP 0.8540) remains in reasonably good shape. Today, CBI retail data will be published. In central Europe, we keep a close eye at the policy decision of the Hungarian central bank. Markets don’t exclude the MNB considering a 0.30% rate hike instead of 0.15%.

News headlines

According to data of the Bank of Korea, GDP growth in South Korea in the second quarter printed at 0.7% Q/Q after rising 1.7% in Q1. Due to favourable base effects, Y/Y growth accelerated from 1.7%Y/Y to 5.9% Y/Y, still marginally softer than expected. Growth was mainly driven by private consumption and government expenditure. Exports were slightly softer than expected. The South Korean Parliament last week approved a supplementary budget of KRW 34.96 trillion won to provide additional pandemic relief. The bank of Korea indicated that the Q2 growth still keeps the economy on track to reach its 4.% forecasts. So, the door is still open for a first BOK rate hike late this year.