EUR weaker after PMI data; AUD holds firm.

EUR/USD

• Eurozone PMI Composite index rose to a three-month high of 53.8 in July, up from 52.8 in June, but below a flash estimate of 54.0. The PMI Services index totaled 54.2, which was the fastest rate of expansion since May 2011. Manufacturing production also expanded, but the rate of increase was subdued compared to the peaks recorded earlier in the year.
• Germany and Spain were the leaders of economic recovery. Job creation was still modest in July. The best situation on labor market was recorded in Germany and Spain. Employment was unchanged in Italy. France reported job losses for the ninth month running, but the rate of reduction was marginal in July.
• There are still no signals of inflation pressure. Average selling prices fell for the twenty-eighth consecutive month in July, as a modest increase in Germany was offset by further price discounting in France, Italy and Spain. HICP inflation amounted in July to 0.4% yoy.
• Despite only modest job creation PMI data are encouraging after a series of disappointing data from the second quarter. On the other hand, there is strong uncertainty as to economic growth in coming months. The main source of this uncertainty is the scale of economic impact of the crisis in Ukraine.
• Eurozone retail sales in June went up by 0.4% mom and 2.4% yoy vs. median forecast of 1.2% yoy. That was the strongest yoy reading in seven years.
• The EUR/USD broke back below 1.3400 after weaker-than-expected Italian PMI Services' reading. Strong retail sales data did not support the EUR showing that the sentiment is still strongly bearish. We keep out short position on the EUR/USD with the target of 1.3335. We have moved our stop-loss level to 1.3430 from 1.3480 previously.

Significant technical levels:

Resistance: 1.3433 (high Aug 4), 1.3445 (high Aug 1), 1.3475 (high Jul 25)

Support: 1.3379 (low Aug 1), 1.3366 (low July 30), 1.3359 (low November 12, 2013)

AUD/USD

• Australia's central bank kept interest rates unchanged. The RBA Governor Glenn Stevens said: "Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time (…) On present indications, the most prudent course is likely to be a period of stability in interest rates." The decision was in line with expectations and the statement was neutral for the markets.
• There was no reaction on the AUD/USD to the foreign trade data. The deficit narrowed to AUD 1.68 bn from AUD 1.9 bn in May. The AUD/USD fell for a while to a session low of 0.9315 on a much weaker than expected China PMI reading. It amounted in July to 50 vs. 53.1 in June. The AUD/USD is retesting broken support area near 0.9330 and bears are likely to defend this zone. We remain short on the AUD/USD.
• This-week macroeconomic calendar is rich in Australian data and events. Investors will be eyeing jobs data scheduled for Wednesday 21:30 EDT and the quarterly statement of monetary policy from the RBA on Thursday 21:30 EDT.

Significant technical levels:

Resistance: 0.9388 (high Jul 30), 0.9416 (high Jul 29), 0.9425 (high Jul 25)

Support: 0.9302 (low Aug 4), 0.9272 (low Aug 1), 0.9257 (low Jun 5)

EUR/GBP

• UK services PMI rose to an eight-month high of 59.1 in July from June's reading of 57.7. The data beat median forecast of 57.9 and our estimate of 58.3.
• The EUR/GBP reached our stop-loss level at 0.7935. We have taken a small profit on our 0.7920 long. We are looking to get long again near 0.7915 with the target of 0.8000, near the 0.8007 (high Jul 1).

Significant technical levels:

Resistance: 0.7985 (high Aug 1), 0.8007 (high Jul 1), 0.8027 (high Jun 30)

Support: 0.7926 (low Aug 1), 0.7910 (low Jul 30), 0.7866 (low Jul 23)

Our current trading positions:

EUR/USD: short at 1.3433, target 1.3335, stop-loss 1.3430. (We have adjusted the stop-loss level from 1.3480 previously).

AUD/USD: short at 0.9330, target 0.9210, stop-loss 0.9380.

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Growth Aces