EUR/USD: Neutral (since 05 Jun 18, 1.1700): Dip below 1.1505 not ruled out but weakness is unlikely to be sustained.
We have held the same view since Wednesday (20 Jun, spot at 1.1585) that “a dip below 1.1505 not ruled out but weakness is unlikely to be sustained”. EUR briefly touched 1.1507 yesterday before staging a robust recovery. The price action reinforces our view that EUR is not ready to reenter a bearish phase just yet. That said, only a break back above 1.1680 (‘key resistance’ level remains unchanged) would indicate that the current downward pressure has eased. Until then, there is still risk for a dip below 1.1505 but the prospect for such a move is not high now.
GBP/USD: Bearish (since 20 Jun 18, 1.3175): Bearish phase appears to be close to ending.
We highlighted on Wednesday (20 Jun, spot at 1.3175) that while the outlook for GBP is bearish, the major 1.3040 level is “likely out of reach” and added “1.3100 is already a strong support”. GBP briefly touched 1.3102 yesterday before rocketing to hit an overnight high of 1.3270. The high was not far from the 1.3290 ‘stop-loss’ level for our bearish view and based on the price action yesterday, a break of 1.3290 would not be surprising at all. In other words, the current bearish phase appears to be close to ending. Looking ahead, a break of 1.3290 would not suggest a bullish reversal but the start of a neutral consolidation phase.
AUD/USD: Bearish (since 20 Jun 18, 0.7385): Decline reaching oversold, weakness likely limited to 0.7330, 0.7300. No change in view.
As highlighted yesterday, while the outlook for AUD is bearish, the decline that started last week is already approaching oversold levels. However, further weakness is not ruled but at this stage, we are seeing strong support at 0.7330 followed by 0.7300. In view of the oversold conditions, any weakness is expected to be slow and grinding and the two levels mentioned earlier are expected to offer solid support. In other words, we do not expect AUD to ‘accelerate’ lower. On the upside, only a break of the ‘stop-loss’ at 0.7455 (level previously at 0.7490) would indicate that a short-term low is in place.
NZD/USD: Neutral (since 22 May 18, 0.6945): Shift to bearish if NY close is below 0.6850. No change in view.
The continuing sharp decline in NZD yesterday came as a surprise (NZD closed lower for the fifth straight day, down by -0.55%). Downward momentum has improved considerably and the odds for a sustained break below the year-to-date low of 0.6850 have increased. In other words, a clear break of 0.6850 (say a NY close below this level) would indicate that NZD has entered a bearish phase (targeting a move to the 2017 low of 0.6780). This scenario appears likely unless NZD can reclaim the ‘key resistance’ at 0.6945 (level previously at 0.6990).
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD has likely moved into a broad consolidation phase.
USD edged above the top of our expected 109.10/110.65 consolidation range but slumped after touching a high of 110.75. The price action reinforces our current neutral view and we continue to expect USD to trade sideways, still likely within a 109.10/110.65 range.