The British pound approached the six-month low against the US dollar on Tuesday, hampered by constant Brexit concerns and slowing UK jobs growth, which in turn push the Euro.
Meanwhile, the US dollar is struggling with the Japanese yen, as the possibility for lowering interest rates by the US Federal Reserve continue to hold the greenback in a defensive position.
The US Dollar Index, which measures the strength of the greenback against six major currencies, is trading without clear direction on Monday, always below the key 97.00 points for the time being. The index is adding to Monday’s gains, although a test/surpass of the key barrier at 97.00 the figure still appears elusive, all amidst a generalized cautious tone ahead of Powell’s speech today and key data releases.
The US Dollar Index has so far managed to rebound from last week’s pullback to the 96.70 region, where some decent contention appears to have turned up near the critical 200-day SMA.
The markets will focus on the June’s Retail Sales, as well as Import/Export Prices, Industrial and Manufacturing Production figures, the NAHB index, Business Inventories for the month of May and TIC Flows.
At the moment, the US Dollar Index is gaining 0.03% at 96.95 points and faces the next resistance at 97.59 points (high July 9) followed by 97.80 points (monthly high June 3) and finally 98.37 points (2019 high May 23). On the flip side, a break below 96.73 points (200-day SMA) would aim for 96.46 points (low June 7) and then 96.04 points (50% Fibo of the 2017-2018 drop).
The EUR/USD pair was declining below the support levels at 1.1250. Sellers are now quickly returning to the single currency and are therefore forcing EUR/USD to recede to fresh multi-day lows in the 1.1230 region. The down move has accelerated after the recent breakdown of the 100-day, 10-day and 55-day SMAs.
In general, the rate passed its technical support levels during the moments that they stood each on its own.
From a technical analysis theoretical perspective, the currency exchange rate should decline, as it has no tech support as low as the 1.1220 level where a monthly pivot point is located at. The EUR/USD pair needs to regain the 1.1280/90 band – recent peaks and the 21-day SMA – in order to alleviate the prevailing downside pressure and to allow for a test of the critical 200-day SMA at 1.1321. On the way south, further downside impulse should breach the key support at 1.12 the figure, exposing the 1.1193/76 band, where coincide July low, June 18 low and March low.
The USD/JPY pair surrendered a major part of its early uptick and is currently placed in the neutral territory, around the 107.95 area.
The pair continued with its struggle to sustain/build on the momentum beyond the 108.00 area, with a combination of negative factors prompting some intraday selling during the early European trading session.
The prevailing cautions mood supported demand for traditional safe-haven assets – including the Japanese Yen and turned out to be one of the key factors behind the pair’s sudden drop of around 15-pips over the past hour or so.
The GBP/USD pair remained heavily offered and struggled near multi-month tops, just above mid-1.2400s post-UK monthly employment details.
After a brief consolidation during the Asian session on Tuesday, the pair met with some aggressive supply and extended the previous session’s retracement slide from the 1.2575-80 region. The downfall lacked any obvious fundamental catalyst and could be solely attributed to Brexit-related uncertainties.
The bearish pressure remained unabated following the release of the latest UK employment details, showing that wages – both excluding and including bonuses, recorded a stronger-than-expected growth. This coupled with the fact that the UK unemployment rate held steady at 3.8% largely offset an unexpected jump in the number of people claiming unemployment-related benefits.
The pound was under pressure as investors were frustrated by the prospect that Eurosceptic Boris Johnson would win the race to lead the conservative party and become the next British Prime Minister as early as the end of this month.
The poor economic data and the Bank of England (BoE) signals that it can cut interest rates instead of raising them, as earlier expected, have also pushed the pound.
From a technical perspective, a follow-through selling below multi-month lows support – around the 1.2440 area, will set the stage for an extension of the bearish trajectory towards the 1.2400 round figure mark en-route the 1.2370 area – support marked by the lower end of a four-month-old descending trend-channel.
On the flip side, the key 1.2500 psychological mark now becomes immediate strong resistance, which if cleared might trigger a short-covering bounce and lift the pair back towards the 1.2575-80 supply zone. Only a sustained move beyond the mentioned barrier might negate the bearish bias and open the room for any further near-term recovery for the major.