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GBP/USD: daily update GBP/USD is rose after 4 days of declines from Monday’s high above $1.5400 to today’s low at $1.5102. The pair’s oversold on H4, so there is a corrective bounce. Resistance is at $1.5200, $1.5240, $1.5300. British home price data was positive. UK construction PMI jumped to 57.0, the highest levels since 2010. Yet, we stick to the view of selling sterling on the rallies, around $1.5250. Downside targets lie at $1.5055 (61.8% Fibo), $1.5000 (psychological level), $1.4960 and $1.4813 (July low). An increase above $1.5300 will make us review the short-term outlook. Chart. H4 GBP/USD

Bank of England: “forward guidance”? As it was expected, the Bank of England decided to leave its interest rate unchanged at 0.5% and the amount of asset purchases at 375 billion pounds. Unlike last month, the central bank didn’t issue a long statement. Instead the regulator reaffirmed its intention to improve communication and provide forward guidance. Analysts believe that Governor Carney will announce new forward guidance for UK monetary policy at the quarterly inflation report due for release on Wednesday, August 7. The guidance is likely to pin future rate rises to specific targets for unemployment in order to try and keep market interest rate expectations low and allow the fragile recovery to become stronger and more sustainable.

Key currency options Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT). Here are the key options expiring today: EUR/USD: $1.3100, $1.3190, $1.3200, $1.3250, $1.3270, $1.3300; GBP/USD: $1.5100, $1.5200; USD/JPY: 98.00, 98.35, 99.00, 99.50, 100.00, 100.50; AUD/USD: $0.8900, $0.9000, $0.9030, $0.9080; USD/CHF: 0.9350, 0.9380; USD/CAD: 1.0320, 1.0350, 1.0400, 1.0450.

August 2: Asian session US dollar headed for weekly gains against all its major peers as improvements in the US economy added to the case for the Fed to start tapering bond purchases which tend to debase the currency. ISM Manufacturing PMI rose in July to 55.4, the highest level since April 2011. Today watch for US non-farm payrolls data at 12:30 GMT (forecast: 184K; previous: 195K). EUR/USD is trading around the psychological support of $1.3200 after it lost about 100 pips yesterday. Demand for euro was limited after the ECB President Mario Draghi said yesterday policy makers expect interest rates in the region to stay low for an extended period. GBP/USD is trading just above $1.5100 after it slid by about 90 pips yesterday. The Bank of England left investors waiting for an expected announcement next week of a new strategy to get British economy back in shape. USD/JPY is around 99.55 after it gained about 170 pips yesterday. USD/CHF is trading above the 200-day MA at 0.9360 after it gained more than 100 pips yesterday. AUD/USD slid to the new almost 3-year low at $0.8889 as the Reserve Bank of Australia is expected to cut rates next week. Australian producer inflation turned out to be lower than expected (0.1% vs. 0.5%). NZD/USD fell by more than 100 pips yesterday and is trading in the $0.7887 area. USD/CAD rose to 1.0350.

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USD/JPY: daily update USD/JPY hit a fresh 1-month low at 97.58 before returning above 98.00. US dollar touched 98.50 on better-than-expected US GDP growth. The pair remains inside the daily Ichimoku Cloud with top at 98.75 and bottom at 97.50. The picture is mixed and the fate of the pair will depend on to which direction US dollar will break the Cloud. Further resistance lies at 99.25, 99.70 and 100.18, while support is at 96.75 and 95.60. OCBC Bank: “Tonight, if the FOMC fails to surprise on the hawkish end, the pair may lose its foothold at 98.00 and slide to 97.50/60 before 97.00.” Chart. Daily USD/JPY

MS: USD may weaken more Morgan Stanley thinks that US dollar will continue correcting down against most currencies. The specialists point out that market players are still very long on USD. In addition, news reports suggest that the FOMC will consider strengthening its forward rate guidance to incorporate some of Chairman Bernanke’s dovish sentiments.Specifically, the FOMC may lower its unemployment target to 6%. “By formalizing Fed’s recent concern about too-low inflation and a premature tightening in financial conditions, the new guidance framework should extend the USD depreciation. Italso should further underline the data-dependency of Fed policy, increasing the market sensitivity to downside US data surprise.” However, MS thinks that USD may be bottoming versus Japanese yen and British pound. “The prospect of the Bank of England formally adopting a forward rate guidance framework with the publication of its Inflation Report on August 7 suggests that short cable positions would soon be attractive. And the third straight week of sizable foreign bond purchases hints that the next leg of JPY weakness driven by Japanese investors may be at hand,” says the bank.

31 July 2013 Key currency options Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT). Here are the key options expiring today: EUR/USD: $1.3100, $1.3125, $1.3150, $1.3200, $1.3230, $1.3250, $1.3270, $1.3300, $1.3320, $1.3350; GBP/USD: $1.5300; USD/JPY: 97.40, 97.50, 97.65, 98.00, 98.30, 99.25, 100.00, 100.20; USD/CHF: 0.9400; AUD/USD: $0.9000, $0.9050, $0.9100, $0.9125, $0.9150, $0.9175, $0.9200; USD/CAD: 1.0250, 1.0300; AUD/JPY: 90.95, 91.25.

USD/JPY: daily update USD/JPY found support in the 97.60/65 area yesterday (50% retracement of an advance from June to July). On the upside the pair’s for the second day capped by the 100-day MA at 98.45. The pair’s inside the daily Ichimoku Cloud with top at 98.75 and bottom at 97.50. The picture is mixed and the fate of the pair will depend on to which direction US dollar will break the Cloud. Further resistance lies at 99.25, 99.70 and 100.18, while support is at 96.75 and 95.60. Macquarie Bank: “We have run into pretty important support levels just below 98.00, and they’ve held. Technical traders will be thinking that signals a potential bounce in a short term.” Still, Bank of America keeps targeting 93.65/93.73 and potentially the larger range lows at 90.91 before renewed basing. Chart. H4 USD/JPY

GBP/USD: some bearish views Bank of America Merrill Lynch: Gains should fail to exceed $1.5438, worst case the 200-day MA at $1.5570 before the longer term bear trend resumes for $1.4783/1.4767 and below. An impulsive break of $1.5269 will confirm a top and bear trend resumption. Standard Bank: Sell GBP/USD at current levels targeting levels below $1.5000 as the Bank of England will meet on Thursday and may take a harder stance on forward guidance, similar to the Fed’s. Chart. Daily GBP/USD

Key currency options Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT). Here are the key options expiring today: EUR/USD: $1.3100, $1.3200, $1.3250, $1.3285, $1.3325; USD/JPY: 97.00, 97.50, 98.00, 98.05, 98.20, 98.25, 98.40, 98.50, 98.75, 99.00, 100.00; GBP/USD: $1.5200, $1.5300, $1.5325, $1.5350; AUD/USD: $0.9150, $0.9215, $0.9265; USD/CAD: 1.0200, 1.0270; EUR/JPY: 130.00; EUR/GBP: 0.8630.

July 30: Asian session EUR/USD remained capped by $1.3300 yesterday and slid to the $1.3250 area today. Euro stayed lower before the ECB policy meeting on Thursday. The Federal Open Market Committee starts a 2-day meeting today. In addition, the contraction in US pending home sales (data were released yesterday) wasn’t as big as expected. In the euro area watch today for GfK German consumer climate and preliminary CPI, Spanish GDP and Italian 10-year bond auction (see the economic calendar). GBP/USD didn’t manage to overcome $1.5400 and is trading around $1.5340 today. USD/JPY got support around 97.65 yesterday and recovered to 98.40. Yen weakened against most of its major peers as rallying Japanese shares damped demand for haven assets and weaker-than-forecast production data backed the case for the Bank of Japan to expand stimulus. USD/CHF is trading above 0.9300 after an advance made yesterday. AUD/USD dropped below $0.9100 to $0.9060. Australian building approvals slumped by 6.9%, while economists expected growth by 2.2%. The Reserve Bank of Australia Governor Glenn Stevens signaled there is still room for interest rates and the currency to fall. NZD/USD is declining for the second day in a row. The pair’s now testing levels below $0.8000. New Zealand’s building consents also contracted. USD/CAD keeps consolidating in the 1.0285/50 area. Canadian dollar remains near 1-month high as crude oil, the nation’s largest export, remained above $100 per barrel for the 18th day.

AUD/USD: Elliot wave analysis Weekly. The pair keeps forming the wave III of the downside impulse. Daily. At the moment we are witnessing the formation of the corrective wave (4). Then the market will start a decline in the wave (5). H8. The wave (4) is taking form of a long horizontal correction. As it always happens with such waves, it’s aimed upwards, against the dominant trend of the higher wave level. When this wave is complete, we expect a decline in the wave (5). Roman Petuchov for FBS

USD/JPY: Elliot wave analysis Daily. The wedge is complete and global corrective wave 2 is now enfolding. This wave may take a form of a Zigzag or a double Zigzag. Let’s examine its structure in detail. H4. We are witnessing the formation of the first (a)-(b)-© Zigzag. We assume that the waves (a) and (b) are complete and the wave © has already started forming. At the moment the downside impulse wave [3] of © is still developing. H1. Watch the detailed marking on H1. We expect the continuation of the monotonous decline in the wave [3]. Roman Petuchov for FBS

GBP/USD: Elliot wave analysis Weekly. On the weekly chart there’s a global Zigzag A-B-C. The pair keeps forming the wave С which aims at the level 1.1 where the pair was last seen in 1985. H12. The wave (II) is still forming. Let’s examine its structure in detail. H4. The wave (II) is probably taking form of the a-b-c Zigzag. The impulse a is close to an end. We’ll likely see the formation of the wave (4) in the near term. After that the market will rise in the fifth wave and the whole impulse will be complete. When it happens, the market will start a decline in a corrective wave b. Roman Petuchov for FBS

EUR/USD: Elliot wave analysis Monthly. The pair may have finished forming the wave B of the rising Zigzag А-В-С. Wave B is in the form of the Triple Three [w]-[x]-[y]-[x]-[z]. EUR/USD currently keeps forming wave C. Let’s analyze the wave’s structure in detail. Daily. The pair will soon finish the wave II of ©. When the wave II is complete, we’ll see a decline in the wave III. H4. The marking on H4 shows that the wave (3) is almost over. When this wave is formed, we’ll see a corrective wave (4) which may take form of a flat as it often happens with the fourth waves of the impulses. Then the pair will rise in the wave (5) and the formation of II will be over. See the projected trajectory on the picture. Roman Petuchov for FBS

Trade signals from Danske Bank EUR/USD: Long at $1.3260 with a target of $1.3338 and a stop at $1.3248 USD/JPY: Short at 99.90 with a target of 96.95 and a stop at 99.50 GBP/USD: Long at $1.5175 with a target of $1.5480 and a stop at $1.5285 USD/CHF: Sell at 0.9320 with a target of 0.9176 and a stop at 0.9365 AUD/USD: Long at $0.9230 with a target of $0.9416 and a stop at $0.9170 USD/CAD: Long at 1.0290 with a target of 1.0445 and a stop at 1.0230

EUR: factors to watch (July 29 - August 1)

AUD: factors to watch Jul 29-Aug 2

JPY: factors to watch Jul 29-Aug 2

USD: factors to watch Jul 29-Aug 2

Key currency options Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT). Here are the key options expiring today: EUR/USD: $1.3100, $1.3200, $1.3220, $1.3300, $1.3350; USD/JPY: 97.00, 97.35, 98.25, 98.30, 98.40, 99.50, 99.75, 100.05; GBP/USD: 1.5335 1.5375 1.5490 1.5500 USD/CHF: 0.9400 AUD/USD: $0.9240, $0.9275, $0.9350, $0.9375; USD/CAD: 1.0200, 1.0280, 1.0380; EUR/JPY: 131.00; EUR/GBP: 0.8565, 0.8630, 0.8675; EUR/CHF: 1.2350, 1.2450.

July 29: Asian session Demand for US dollar is limited before a private report forecast to show sales of previously owned US homes fell (14:00 GMT) and the Fed starts a 2-day meeting tomorrow. EUR/USD is still capped by $1.3000. Traders await US data and guidance from European stocks before that. GBP/USD is constrained below $1.5400.The UK will release net lending to individuals data at 08:30 GMT and CBI realized sales at 10:00 GMT. USD/JPY is trading in the slightly negative zone around 97.90. Japan June retail sales disappointed the markets, contracting by 0.2% m/m (vs. +0.8% expected). USD/CHF holds around 0.9285. AUD/USD touched $0.9290, but then edged lower to $0.9255, staying almost flat. Tonight Australia is scheduled to release building approvals data; RBA governor Stevens delivers a speech. NZD/USD is consolidating around $0.8080. Data over the weekend showed China industrial profits increased by 6.3% y/y in June, slowing from +15.5% in May. USD/CAD is still holding above the 100-day MA at 1.0265.