This morning saw a cautious start to trading in the wake of geopolitical turmoil late last week and over the weekend. The attempted coup in Turkey that took place late on Friday prompted market participants to opt for popular havens, such as gold, the US dollar and the Japanese yen, but those position are steadily being reversed this morning. Investors are now turning their attention to the European Central Bank, which delivers its policy decision on Thursday — the ECB’s first meeting since the UK voted to leave the EU. There are no expected changes to existing measures but, ECB chief Mario Draghi is likely to reiterate that fallout of the Brexit vote on the eurozone’s growth and inflation outlook is being monitored closely. The fact that the Bank of England kept rates on hold last week lowers the urgency for the ECB to take imminent action. The ECB rate decision is due to be announced at 12:45 on Thursday with the subsequent press conference an hour later.
EUR/USD. Euro’s intra-day selloff from 1.1149 (Europe) to 1.1053 after release of upbeat U.S. economic data and then brief drop to 1.1025 near New York close on news of a military coup in Turkey confirms near term erratic rise from 1.1002 has ended at 1.1165 (Thursday) and downside bias remains. However, as daily outlook remains broadly consolidative, reckon pivotal sup at 1.0971 would remain intact. Expect 1.1098 (previous sup, now res) to cap recovery in Asia and yield marginal decline decline below said Friday’s low and only above 1.1100/10 may risk stronger gain to 1.1130/40 before prospect of another fall
GBP/USD. The Sterling has recovered the smile at the beginning of the week, now pushing GBP/USD further north of the 1.3200 handle. GBP/USD supported near 1.3190. The pair dipped to the area of 1.3190 in early trade in response to the events from Turkey over the weekend, although it has managed to quickly revert the negative start and advance further beyond 1.3200 the figure along with the rest of the risk-associated space. With risks surrounding the ‘Brexit’ vote somewhat mitigated, GBP will now look to the BoE and its potential easing measures (likely to be announced at the August meeting) as the main catalysts of the pair’s direction in the near to medium term. GBP/USD levels to consider As of writing the pair is gaining 0.40% at 1.3235 facing the next resistance at 1.3481 (high Jul.15) followed by 1.3535 (high Jun.29) and finally 1.3646 (38.2% Fibo of 1.5020-1.2796). On the flip side, a breakdown of 1.3101 (low Jul.14) would expose 1.2849 (low Jul.11) and then 1.2797 (20916 low Jul.6).
USD/JPY finds stiff resistance by 50-DMA at 106.22, break above targets 106.81. USD/JPY edges lower from session highs at 106.01, intraday bias higher. The pair was capped by 50-DMA on Friday, which is currently at 106.22 and stiff resistance. The pair is currently holding above major trendline support at 105.30, break above 50-DMA could target 106.81 (June 24th high). On the flipside, 5-DMA at 104.98 is strong support, break below could see weakness upto 103.97. Momentum studies are bullish, however stochs are at oversold so some caution advised.
GBP/EUR. The pound to euro rate spiked higher following the release of the BOE’s monetary policy decision on Thursday, and as a consequence the chart now looks more likely to include further rises in the near-term. This comes despite the dominant bearish short-term trend ever since the referendum. The MACD indicator in the bottom pane is confirming that the pair could be about to start a trend higher, after the MACD line crossed its signal line. If the exchange rate can manage to move above the 1.2099 post-BOE meeting highs – then that will open the way to a stronger recovery up to the monthly pivot PP at 1.2350 – a level where the rate often stalls or bounces, due to traders clustering counter-trend orders around it.