EUR/USD (1.115): The single currency has been posting steady gains following the decline to the support at 1.105 – 1.1028. However, the steep retracement off the support could pose a risk of a snap back in prices. While 1.110 remains the immediate support that could be challenged, a breakdown below could see EUR/USD give back its gains and test the lower support. To the upside, the target remains at 1.123 – 1.1214, which marks the head and shoulders breakout. There is also a confluence of a horizontal support level near the breakout zone. Above, 1.123, further gains could be seen towards 1.132, in which case the bearish bias stands invalidated.
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EUR/USD, Head and Shoulders remains in play
USD/JPY(101.75): USD/JPY was seen making modest gains after the Brexit selloff. However following the bearish engulfing that was formed on 1st of July, prices have been retreating with support at 101.5 coming into question. Failure to stem the declines could see the 101.5 support give way for further declines in USD/JPY. To the downside 100.5 remains the next key level of interest. Looking at the Stochastics oscillator, there is scope for USD/JPY to make lower lows, against the Stochs’ higher low and eventually form a bullish divergence. The near-term correction could see USD/JPY test 105 – 106 resistance following a move above 101.50.
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USD/JPY: Watch for bullish divergence below 101.5
GBP/USD (1.315): GBP/USD continues its declines with prices seen testing the Brexit lows at 1.31225. A breakdown below this level could send GBP/USD to new lows, potentially to 1.30 levels. However, with the Stochastics now in the strongly oversold levels, a near-term correction cannot be ruled out. Above 1.322 price level, GB/PUSD could be seen rallying to fill the open gap at 1.3677, which remains to be seen. For the moment, the bearish momentum could see further declines in the near term, which could be accelerated on a breakout below 1.3122.
