EUR/USD: Neutral (since 05 Mar 18, 1.2335): Short-term strength has scope to extend to 1.2425. No change in view.
We highlighted yesterday that “while upward momentum is still not as strong as preferred, the current short-term strength has scope to extend further to the next resistance at 1.2425”. There is no change to the view as EUR subsequently hit a high of 1.2413 before easing off. As long as the ‘key support’ at 1.2310 is intact, we continue to see chance for another push higher towards 1.2425. As noted previously, this is a rather critical resistance as a clear break of this level would increase the odds for a move beyond last month’s peak at 1.2475. In view of the current lackluster momentum, we feel that it is premature to anticipate such a move. All that said, in order to maintain the current mild upward pressure, EUR should move higher quickly as a prolonged consolidation at these levels would lead to a rapid loss in momentum.
GBP/USD: Neutral (since 07 Mar 18, 1.3895): GBP has moved into a correction phase.
The weaker than expected UK inflation data sent GBP crashing below 1.4230 and the break of this ‘key support’ has put paid to our expectation for the rally in GBP to extend further to 1.4400. The 1.4377 high registered on Tuesday (17 Apr) is acting as a very strong resistance now and this level is unlikely to be threatened, at least not for the next several days. That said, the current GBP weakness is viewed as part of correction/consolidation phase and not the start of a major bearish reversal. From here, we expect GBP to trade sideways even though the near-term bias is for a probe lower towards the bottom of the expected 1.4080/1.4320 consolidation range.
AUD/USD: Neutral (since 22 Mar 18, 0.7770): Diminished odds for rebound to extend higher.
After trading in a quiet manner for a couple of days, AUD registered an ‘outside day’ yesterday and closed on a positive note. As highlighted yesterday, another ‘up-leg’ is not ruled but 0.7825 is a major resistance and is unlikely to yield so easily. However, a clear break of this level would shift the focus towards the next resistance at 0.7865. Overall, in order to maintain the current fledgling momentum, AUD has to make a run for the upside soon or the odds for a stronger rebound would diminish further. On the downside, a break of the ‘key support’ at 0.7720 would indicate that the current mild upward pressure has eased. On a shorter-term note, 0.7745 is already a strong level.
NZD/USD: Neutral (since 05 Feb 18, 0.7280): NZD has moved into a consolidation phase.
We noted yesterday “the weakened undertone suggests that the immediate bias is for a probe lower towards the bottom of the expected 0.7290/0.7390 consolidation range”. NZD subsequently touched a low of 0.7304 before staging a mild rebound. The undertone remains on the soft side and we continue to hold the view that any weakness is part of a consolidation range and is unlikely to be sustained.
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD is expected to trade sideways. No change in view.
The 35 pips range registered yesterday is the smallest one-day range so far this year (24-hour range has been 106.85 between 107.20). The muted price action offers no fresh clues and we continue to hold a neutral stance and expect USD to trade sideways. The key levels are at 106.20 on the downside and 107.90 on the upside but for the next couple of days, 106.60/107.65 is likely enough to contain the movement in USD.