Daily Forex Market Preview, 04/07/2017
The US dollar index was seen trading stronger on Monday after data from the Institute of Supply Management (ISM) showed that manufacturing activity rose to 57.8 in the month of June. The ISM's reading marked the highest level in the index since August 2014 and reversed the declining trend over the past few months.
As a result, the euro and the British pound continued to weaken, while the Japanese yen fell against the US dollar. While the ISM manufacturing activity increased, Markit's measure of manufacturing activity in the US slipped to 55.0, missing estimates of 58.5 and declined from 60.5 posted the month before.
Looking ahead, the US markets are closed today on account of the US Independence Day holiday. Data from the US is, therefore, limited for today. Traders are likely to shift focus to the RBA's meeting followed by UK's construction PMI data.
EURUSD intraday analysis
EURUSD (1.1371): The EURUSD extended the declines for a second consecutive day, giving up the gains above $1.1400. Price action is now seen testing the support level at 1.1357. Lack of any clear fundamentals today and slow trading is likely to keep the EURUSD trading flat. With the support level seen holding currently, EURUSD could be attempting to post another high off the bounce from 1.1357 support. A lower high could signal that the currency pair could be potentially breaking below the support at 1.1357 with the next level at 1.1300 coming into focus. To the upside, a continuation is required with further gains coming only on a convincing close above the previous high that was formed at 1.1445.
GBPUSD intraday analysis
GBPUSD (1.2942): The British pound was weaker yesterday following the disappointing manufacturing PMI data. Price action posted a reversal near the 1.2975 - 1.3000 resistance zone. Further declines could be seen coming with GBPUSD likely to fall back to the support level at 1.2800. On the 4-hour chart, any near-term bounce could see the 1.2975 price level being tested for resistance. This could confirm the downside towards 1.2800. Failure to limit the gains near 1.2975 could signal a continuation to the upside.
USDJPY intraday analysis
USDJPY (113.23): USDJPY posted strong gains yesterday, and price action managed to clear the 112.00 resistance level. The rally to 113.36 marks the completion of the bullish flag pattern. We could now expect to see some consolidation take place unless USDJPY can clear the 113.36 level which is currently acting as resistance. There is a risk of the downside in prices as the support level at 110.70 is likely to be tested in the medium term. Watch for the initial support at 112.00 which could be in focus immediately. Failure to contain the declines here could push USDJPY lower to 110.78.