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Forex snapshot

Today’s macro calendar has its focus on the US with services PMI and pending home sales all expected this afternoon

Euro and US dollar notes
Source: Bloomberg

With the dollar index looking strong ahead of what is a key week for US corporate and macro data, any negative sentiment in relation to tougher sanctions on Russia may lend additional support to the greenback ahead of the pound and the euro. The Federal Open Market Committee potentially voting for additional tapering of the current quantitative easing programme this week could also serve to underpin the dollar.

$1.3440 capping EUR/USD upside

US services PMI is expected to show additional growth and remain firmly in expansion, albeit at a slightly lower level from June’s 61.0 print.

Once the lynchpin of the US economic rebound, the housing sector looked a little tired in the first part of 2014. The rebound in May came as a result of lower mortgage rates and increased inventory accelerating the market. This month is expected to be a little softer.

With the euro below the $1.3470 level, there does seem to be an increased bias to additional downside for the single currency. There appears to be a minor base setting in around $1.3425, and the pair is trapped in a tight range with $1.3440 capping upside in the short term. A break through $1.3420 (Friday’s lows) would put the single currency on a move towards $1.34.

The selloff is looking a tad oversold on the daily chart so a close through $1.3440 could see a bounce back towards $1.3470-80.

Spot FX EUR/USD chart

50-DMA supporting GBP/USD

UK companies have issued 137 profit warnings in the first half of this year, an increase of 9% on the same period in 2013. Pricing pressures as a result of the strong pound and increasing competition are being blamed.

The pound has retreated from its six-year high against the dollar despite increased speculation that the Bank of England will be the first to tighten monetary policy amid a burgeoning economy, and what some might call a property bubble.

Now that the pair has fallen through the $1.70 level, this could become a resistance point. In a downtrend since the $1.7192 highs, the fact that we have seen declines in sterling for eight consecutive days could bring about a short squeeze. A break of the 100-hour moving average could help support a drive back towards $1.7060.

The bullish channel in place since November is still very much intact, and the 50-day moving average at $1.6970 is also lending a base. A break below here could target the rising trend support around $1.6920.

Spot FX GBP/USD chart

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