Majors traded in quite limited ranges on Monday, as the market was looking for some major US catalyst this Wednesday, in the form of US CPI and the latest FOMC Minutes.
The calendar was soft, with the EU Trade Balance for June resulting in a surplus of €26.4B, which supported the EUR temporarily in the European morning. In the US, the NY manufacturing index tumbled to -14.9, the lowest in six years, against expectations of a 5.0 advance. Nevertheless, the dollar managed to close the day generally higher across the board.
As for the technical picture, the EUR/USD fell down to an intraday low of 1.1058, but managed to close the day a few pips above the 38.2% retracement of its latest bullish run, from 1.0847 to 1.1213 at 1.1075.
The pair presents a short term negative tone, as in the 1 hour chart, the price was rejected by its 100 SMA and holds now below a bearish 20 SMA, whilst the technical indicators present a tepid bearish tone in negative territory. This financial trading course may be very useful if you are not sure how the Simple Moving Averages (SMAs) work in forex trading.
In the 4 hours chart, the 20 SMA turned south around the 23.6% retracement of the same rally, whilst the technical indicators maintain their bearish slopes in negative territory, supporting the shorter term view. Should the price extend below 1.1060, the downside is open for further declines down to the 1.0980 price zone.
Meanwhile the GBP/USD pair advanced to a fresh 3-week high yesterday, reaching 1.5687. The Pound got help from Kristen Forbes, one of the MPC voting members, who during the weekend said that the UK may need to raise rates sooner, even before the inflation reaches 2.0%, as keeping rates low may undermine the economic recovery.
The pair however, retreated sharply from the level, breaking below the 1.5600 in the American afternoon, where it stays by the close.
On Tuesday, the UK will release its CPI and PPI figures for July, which may give some clues on whether the BOE can raise rates as soon as its members suggest.
Technically however, the bias is lower, as the 1 hour chart shows that the 20 SMA turned lower well above the current level, whilst the technical indicators hold flat near oversold levels.
In the 4 hours chart the price bounced from its 200 EMA, but remains below its 20 SMA whilst the technical indicators hover around their mid-lines, lacking clear directional strength. Strong selling interest has been limiting the upside around 1.5670/80 ever since July started, which means a clear break above it is required to confirm additional advances, quite unlikely for the Tuesday.