EUR in the eye of a cyclone

Today, we turn our interest to the common currency. On a monetary level, the main event for EUR traders in the current week calendar is ECB’s interest rate decision, which is due out today. The bank is widely expected to remain on hold and currently EUR OIS imply a probability of 91.6% for such a scenario to materialise also implying that the market expects the bank to cut rates one more time this year. Hence, we may say that a slightly dovish inclination of the market’s expectations exists, and market attention may turn towards the bank’s forward guidance. Should the bank maintain a dovish tone in the accompanying statement and ECB President Lagarde’s following press conference, it could enhance the market’s expectations for further easing of the bank’s monetary policy and thus weigh on the common currency. On the flip side, a hawkish tone implying that the bank is prepared to keep rates at their current levels for longer, contradicting the market’s expectations we may see the EUR getting some support. On a macro level for the EUR, we highlight the release of the preliminary PMI figures for July of the Euro Zone, Germany and France, with Germany’s manufacturing sector being the most interesting. Overall, should we see the PMI indicators rising implying an improvement of economic activity in the Zone we may see the EUR getting some support as the release would brighten the macroeconomic outlook of the Zone. On a fundamental level, we note that given that the US has reached such a deal with Japan, attention now is placed on the EU. The negotiations are on their way, and analysts do not exclude the possibility of the EU using anti-coercion measures which could restrict US manufacturers’ participation in the EU market or even extend measures to the services sector. Should we see the two sides nearing a deal, we may see the EUR getting some support yet the clock is ticking and Trump’s 1st of August deadline is nearing.

XAU/USD has dropped back below our supported turned to resistance at the 3385 (R1) level. Yet in spite of this the precious metal’s price appears to be moving in a predominantly upwards fashion. We opt for a bullish outlook for the precious metal’s price and supporting our case is the upwards moving trendline which was incepted on the 30th of June. However the RSI indicator below our chart currently registers a figure near 50 which tends to imply a neutral market sentiment. Nonetheless, for our bullish outlook to be maintained we would require gold’s price to remain above our upwards moving trendline in addition to a clear break above our 3385 (R1) resistance level. On the other hand for a sideways bias we would require a clear break below our upwards moving trendline and for gold’s price to remain confined between the 3240 (S1) support level and the 3385 (R1) resistance line. Lastly, for a bearish outlook we would require a clear break below the 3240 (S1) support level with the next possible target for the bears being the 3115 (S2) support line.

EUR/USD appears to be moving in a sideways fashion. We opt for a sideways bias for the pair despite the RSI indicator below our chart currently registering a figure near 60 which tends to imply a bullish market sentiment. For our sideways bias to be maintained we would require the pair to remain confined between our 1.1695 (S1) support level and the 1.1885 (R1) resistance line. On the other hand, for a bullish outlook we would require a clear break above the 1.1885 (R1) resistance line with the next possible target for the bulls being the 1.2070 (R2) resistance level. Lastly, for a bearish outlook we would require a clear break below the 1.1685 (S1) support level with the next possible target for the bears being the 1.1480 (S2) support line.

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Today we get Germany’s GfK consumer Sentiment for August, UK’s and the US preliminary PMI figures for July, UK’s CBI trends for industrial orders for July, UK’s CBI business optimism indicator for Q3 and from the US the weekly initial jobless claims figure and Canada’s retail sales for May. On a monetary level, Turkey’s CBT is expected to cut rates, which may weigh on the Lira. In tomorrow’s Asian session, we get UK’s consumer confidence for July and from Japan, Tokyo’s CPI rates.