• EUR/GBP is under pressure after peaking at the 0.9326 level.
  • The retracement down can extend towards the 0.9100 and 0.9082 supports.

EUR/GBP daily chart

EUR/GBP is retracing down after peaking at the 0.9326 level. The market almost reached the August 29, 2017 high at the 0.9307 level.

EUR/GBP 4-hour chart

EUR/GBP is losing on the backfoot below the 0.9149 resistance and the 50/100 SMAs. The market is set to decline towards 0.9100 and 0.9082, according to the Technical Confluences Indicator.

EUR/GBP 30-minute chart

EUR/GBP is under pressure below the main SMAs. Immediate resistances are seen at 0.9149, 0.9182 and 0.9230 according to the Technical Confluences Indicator.

Additional key levels

  • China's foreign ministry says they are dissatisfied with US action on Huawei.
  • 10-year US Treasury bond drops more than 2% to weigh on financial shares.
  • Falling crude oil prices weigh on energy shares on Tuesday.

After closing the last three sessions higher, major equity indexes in the US started the day in the negative territory on Tuesday. As of writing, the Dow Jones Industrial Average was losing 0.27% on the day while the S&P 500 and the Nasdaq Composite were erasing 0.4% and 0.2%, respectively.

Following the US decision to delay the ban on Huawei for 90 days while adding 46 new Huawei subsidiaries to the entity list, China's Commerce Ministry said that they were dissatisfied with the US sanctions on Huawei, killing hopes of the US action to bring sides closer to a trade deal.

The risk-off atmosphere ramped up the demand for safe-haven Treasury bonds and forced the yield on the 10-year reference to lose more than 2% on the day and weighed on the rate-sensitive S&P 500 Financials Index, which was last down 0.9% on the day to lead the losers.

In the meantime, following Monday's recovery, crude oil prices turned south today and the barrel of West Texas Intermediate was last down 1.4% on the day, causing the S&P 500 Energy Index to erase 0.85% in the early trade.

German Chancellor Angela Merkel crossed the wires in the last minutes saying that the EU will remain united in its approach to Brexit and added that they will think about practical solutions to the Irish backstop problem, per Reuters.

"Britain needs to decide which way it goes, we have made our offer to work closely," Merkel noted. Further commenting on the backstop issue, Merkel said that it is a question of the political declaration on future ties, not of the Withdrawal Agreement.

The British pound rose sharply on these comments and was last seen trading at 1.2128 against the dollar, posting small gains on the day.

Italian prime minister Giuseppe Conte has announced he is resigning, deepening the crisis in the third-largest economy in the euro-zone. Italy may go to elections around October if a political solution is not found.

Conte has accused interior minister and La Lega leader Matteo Salvini of bringing the government down. Salvini seeks to take advantage of his popularity to win the elections and become PM. Elections are not a done deal as the 5-Star Movement – the other coalition member – may form a government with the Democratic Party.

The debt-struck country has clashed with the European Union around its budget, and political uncertainty may increase tensions between Rome and Brussels.

EUR/USD is trading around 1.1075, under pressure. The daily low is 1.1065. Further support awaits at the 2019 low of 1.1027. Resistance is seen at 1.1110.

According to TD Securities analysts, the slight risk-off tone to start the morning has supported gold north of $1,500/oz mark, but recent dollar strength continues to constrain any excitement on the day.

Key Quotes

“The market is anxiously anticipating Fed Chair Powell's Jackson Hole speech on Friday, which could prove to be a disappointment for the market. Indeed, our rates strategists note that the Committee is divided on the outlook for rates and the impact of weak global growth and trade uncertainty on the US remains uncertain, while financial conditions have not tightened materially — which may embolden the Fed to stay the course and ultimately set markets up for a disappointment this week.”

“With gold positioning firmly skewed to long exposure, disappointing market expectations suggest prices could be poised for a consolidation lower in the near term, but any downside will likely be contained as a weakening economy, growing negative debt pile and dovish global central banks remain a strong platform for the yellow metal moving forward. As for the industrial precious metals, we estimate that CTAs remain sellers of platinum with downward momentum gaining strength.”

According to a statement published by the UK's Brexit Department, UK officials will stop attending most EU meetings after September 1, as reported by Reuters.

"It makes sense to unshackle UK officials from EU meetings ahead of Brexit," the department said. "Officials will only now go to EU meetings that really matter, reducing attendance by over half."

The GBP/USD pair, which erased a small part of its daily losses and recovered to 1.21 earlier in the session, is now down 0.3% on the day at 1.2089.

First Deputy Governor of the Riksbank Kerstin af Jochnick crossed the wires in the last minutes noting that the risk of hard Brexit had increased. Regarding the current state of the Swedish economy, Jochnick said that June and July outcomes were in line with their inflation forecasts and that they were expecting decent growth of the economy.

"The recent data doesn't suggest dramatic slowdown of the world economy," Jochnick argued. "The market is more pessimistic than Riksbank."

The EUR/SEK pair retreated slightly from the 12-day high that it set earlier in the session and was last seen trading at 10,7697, still adding 0.4% on a daily basis.

  • GBP/USD is weak below 1.2100 in the New York session
  • The levels to beat for bears are the 1.2065 and 1.2052 levels.

GBP/USD daily chart

The Cable is trading in a bear trend below the main daily simple moving averages (SMAs).

GBP/USD 4-hour chart

GBP/USD is trading below 1.2097 resistance and the 100/200 SMAs suggesting a bearish bias in the medium term. The levels to beat for bears are 1.2065, followed by 1.2052, 1.2021 according to the Technical Confluences Indicator.

GBP/USD 30-minute chart

GBP/USD is losing steam on Tuesday. Immediate resistances are seen at 1.2097, 1.2122, 1.2141, 1.2154 and the 1.2173 level, according to the Technical Confluences Indicator.

Additional key levels

  • EUR/USD remains fragile near weekly lows.
  • Italy’s PM Conte criticised Lega’s no-confidence motion.
  • Attention stays on FOMC minutes and Powell’s speech.

EUR/USD is now meandering the 1.1070/80 area as the speech by PM M.Conte before the Senate is under way.

EUR/USD remains unable to pick up pace

The downtrend in the pair looks unabated so far today against the backdrop of increasing cautiousness ahead of the publication of the FOMC minutes on Wednesday and the speech by Chief J.Powell at the Jackson Hole Symposium on Friday.

EUR stays vigilant as well on political developments in Italy, where PM M.Conte said the Lega’s decision to present a ‘no-confidence’ motion will have consequences for the country and will likely prevent the budget to be passed in time. Conte also argued that the VAT would likely be raised.

Earlier in the euro-docket, German Producer Prices rose 0.1% on a month to July and 1.1% from a year earlier.

What to look for around EUR

EUR has finally succumbed to the downside pressure and is extending the recent breakdown of the 1.1100 handle on the back of shrinking ‘repatriation’ forces, renewed buying interest surrounding the buck and expectations of ECB easing. That said, sustained bullish attempts in the pair still look flimsy amidst ECB’s preparations for a fresh wave of monetary stimulus (most likely to be announced in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. This scenario has been confirmed as of late following poor results from the euro-docket, adding to the unremitting deterioration of the economic outlook in the region. On another front, Italian politics has resurfaced as a source of uncertainty as of late and is expected to weigh on the sentiment sooner rather than later.

EUR/USD levels to watch

At the moment, the pair is up 0.03% at 1.1080 and a break above 1.1141 (21-day SMA) would target 1.1224 (55-day SMA) en route to 1.1282 (high Jul.19). On the flip side, the next down barrier aligns at 1.1066 (low Aug.16) seconded by 1.1026 (2019 low Aug.1) and finally 1.0839 (monthly low May 11 2017).