EUR/USD and GBP/JPY stabilise while EUR/GBP slips

EUR/USD so far remains above key support zone

Last week EUR/USD managed to break its fall slightly above the $1.036 to $1.0350 May and June lows by dropping to $1.0366 before recovering as the European Central Bank (ECB) began its rebalancing programme to prevent financial fragmentation among euro zone countries.

The publication of a much weaker than expected German Trade Balance at -€1 billion in May versus an expected €1.2 billion and €3.5 billion in April, the first trade deficit since German reunification in 1991, doesn’t seem to have impacted the cross earlier today as the US is celebrating Independence Day.

Minor resistance remains to be seen at the April low at $1.0471. Above it, there is no resistance to speak of until the 55-day simple moving average (SMA) and mid- to late June highs at $1.0588 to $1.0615. While it caps, overall downside pressure should remain in play.

Failure at $1.035 may lead to a slide towards parity taking shape.

EUR/GBP formed another interim top

EUR/GBP is trading back below its £0.8618 May high, following Friday’s brief foray to £0.8678, only to then rapidly come off again as Spain’s jobless rate falls to its lowest number since 2008 and German trade balance for May showed its first deficit since German reunification.

Minor support between the late May and early June highs at £0.8592 to £0.8588 is thus back in the frame with more significant support being found between the 24 June low, three-month support line and last week’s low at £0.8562 to £0.8551.

Resistance above £0.8678 can only be seen at the currency pair’s one-year mid-June high and the 200-week SMA at £0.8721.

GBP/JPY expected to recover further from last week’s low at ¥161.58

The sell-off in the GBP/JPY last week took it to ¥161.58 before stabilising on Friday.

The cross is trying to reverse its last couple of weeks’ descent and rise back towards the 23 June low at ¥164.66 as rising oil prices weigh on the Japanese yen since Japan is a large energy importer and as the British pound reverses some of its recent losses.

Above ¥164.66 the two-month resistance line can be seen at ¥166.16 and the 17 June high at ¥166.22.

Below last week’s low at ¥161.58, sits the June trough at ¥160.00.

From a technical point of view, a fourth Elliott Wave seems to be in the making with its low coming in at the ¥160.00 June low with a final fifth Elliott wave to the upside to eventually be seen. It should take the cross to above its April and current June highs at ¥168.43 to ¥168.73 towards the ¥170.00 zone and above.

On the way up, resistance comes in at the 21 June high at ¥167.91.