EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR is mild downward pressure, could test 1.1330 support.
EUR eked out another ‘fresh’ low of 1.1367 yesterday (17 Jan) before recovering to end the day little changed at 1.1395 (-0.01%). The price action reinforces our view that EUR is “under mild downward pressure” and we continue to see chance for a test of the 1.1330 support. However, the next support at 1.1300 is a major level and is unlikely to yield so easily. On the upside, only a move above 1.1460 (level was at 1.1480 yesterday) would indicate that the current mild downward pressure has eased.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): NY close above 1.3000 would suggest start of a sustained rebound.
On Wednesday (16 Jan, spot at 1.2870), we held the view “GBP could continue to gyrate within a broad 1.2600/1.3000 range for the next couple of weeks”. However, the solid surge in GBP that quickly hit 1.3001 yesterday (17 Jan) came as a surprise. Upward momentum has improved considerably and if GBP were to register a daily closing above 1.3000 in NY, it would suggest the start of a sustained rebound. All in, we expect GBP to stay underpinned from here unless it moves below the ‘key support at 1.2860.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Recovery in AUD has room to extend to 0.7270. No change in view.
Despite the relatively deep pull-back in AUD yesterday (NY close of 0.7167, -0.50%), it is too early to expect a short-term top. We continue to hold the view that the recovery from the ‘flash crash’ low has room to extend to 0.7270. That said, yesterday’s price action has dented the upward momentum and the prospect for 0.7270 to be tested has diminished. On the downside, a move below 0.7120 would indicate last week’s 0.7235 high is a short-term top.
NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD under mild downward pressure, could grind lower to 0.6710.
There is not much to add to yesterday’s (17 Jan) update. As highlighted, despite the relatively large decline on Wednesday (16 Jan), there is only a slight improvement in downward pressure. For now, we continue to hold on the view that barring a move above 0.6850, NZD is expected to grind lower to 0.6710 in the coming days. The prospect for a sustained decline below 0.6710 remains low.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD could test 109.40 but a sustained up-move appears unlikely. No change in view.
While USD moved above the top of our expected 107.00/109.00 sideway-trading range and closed at a post-‘flash crash’ high of 109.08 (+0.38%), we have doubts about the sustainability of the current short-term USD strength. That said, a test of 109.40 is not ruled out but only an unlikely NY closing above this level would suggest USD is ready to challenge 110.00. Meanwhile, USD could stay underpinned for the next few days and only a move below 108.40 would suggest the current mild upward pressure has eased.