EUR/USD: Neutral (since 06 Feb 18, 1.2375): Outlook for EUR is negative, odds for further weakness to 1.2204 have increased. No change in view.
We highlighted yesterday (22 Feb, spot at 1.2340) that the mild downward pressure in EUR would increase further unless it can reclaim 1.2435. EUR slipped further in overnight trading and is pressuring the solid 1.2275 support at the time of writing. Downward pressure has clearly improved and the odds for further weakness towards the month-to-date low of 1.2204 have increased considerably. Looking further ahead, a clear break below 1.2204 would indicate that EUR has moved into a bearish phase. For now, we hold a ‘negative’ outlook for EUR unless it can move back above 1.2400 within the next few days. On a shorter-term note, 1.2360 is already a strong resistance.
GBP/USD: Neutral (since 30 Jan 18, 1.4075): Pressure shift to the downside, could lead to further weakness to 1.3764. No change in view.
In the update on Tuesday (20 Feb, spot at 1.4000), we were of the view that the consolidation phase “could last for a while more”. The sharp drop yesterday that cracked the bottom of the expected 1.3920/1.4200 consolidation phase came as a surprise and has shifted the immediate pressure to the downside. In other words, the outlook for GBP has turned negative and this could lead to further weakness towards the 1.3764 low seen earlier this month. Only a move back above 1.4020 would indicate that the immediate downward pressure has eased.
AUD/USD: Neutral (since 15 Feb 18, 0.7925): Weakened undertone could lead to a test of 0.7730. No change in view.
After trading mostly sideways for several days, the sharp and abrupt decline yesterday that sliced through the 0.7820 support was unexpected. While it is too early to expect that AUD has moved into a bearish phase, the undertone has weakened considerably and this could lead to a test of the solid support at 0.7730 (the month-to-date low near 0.7760 is acting as a strong intervening support). Overall, we expect AUD to stay under pressure, at least for the next several days unless it can reclaim 0.7910.
NZD/USD: Neutral (since 05 Feb 18, 0.7280): Potential double-top forming.
Despite the relatively strong recovery yesterday, the recent price actions still appear to be forming a potential ‘double-top’. As highlighted previously, downward momentum is not strong but the longer NZD stays below the critical 0.7435/40 level, the higher the risk of a deeper down-move. On the downside, 0.7270 is acting as a strong support and a break of this level could lead to a rapid drop towards the ‘neckline’ support at 0.7176.
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD has moved into a consolidation range.
Despite the sharp retreat in USD yesterday, it is too soon to expect a resumption of the recent bearish phase. We turned neutral on USD 2 days ago and there is no change to the view. We continue to expect USD to trade sideways for now, likely within a 105.80/108.30 range (instead of the 106.30/108.50 expected previously).