EUR/USD:
24-HOUR VIEW EUR could continue to trade in a choppy manner, likely within a 1.1220/1.1290 range. The sudden pickup in volatility was unexpected as EUR reversed an initial dip to 1.1203 and surged to an overnight high of 1.1280 (before dropping quickly after NY close). The rapid swings amidst mixed momentum indicators suggest EUR could continue to trade in a choppy manner, likely within a 1.1220/1.1290 range.
1-3 WEEKS VIEW EUR is expected to trade with sideways. After the sharp drop on in EUR on Tuesday, we indicated on Wednesday (17 Jul, spot at 1.1210) that EUR is “expected to trade with a downside bias”. We noted the lackluster momentum and held the view that EUR “is unlikely to accelerate lower”. That said, the rapid bounce during NY hours yesterday (after dovish Fed-speak) came as a surprise. The strong 1.1260 resistance was easily breached (high of 1.1280) and the mild downward pressure has dissipated. The outlook for EUR is mixed from here and it is likely to trade sideways in an ‘undecided’ manner, likely between 1.1200 and 1.1320 range.
GBP/USD:
24-HOUR VIEW Scope for GBP to edge above last week’s 1.2580 peak, the next resistance at 1.2615 is likely out of reach. The strong advance in GBP yesterday came as a surprise as it cracked a couple of major strong resistance levels with ease and soared to a high of 1.2558 during late NY session. While the rapid rise appears to running ahead of itself, there is scope for GBP to edge above last week’s 1.2580 peak but the next resistance at 1.2615 is likely out of reach. Support is at 1.2495 but the stronger level is at 1.2460.
1-3 WEEKS VIEW GBP is likely to trade sideways. The manner of which GBP recouped the sharp decline from earlier this morning came as a surprise. GBP soared by +0.93% (largest 1day gain in 2-1/2 months) and easily took out our 1.2490 ‘key resistance’. The break of 1.2490 nullified our view from Tuesday (17 Jul, spot at 1.2430) wherein we expected GBP to “trade towards 1.2340”. While the sharp bounce yesterday suggests Tuesdays (17 Jul) low of 1.2382 could be a short-term bottom, it is too early to expect a sustained rebound. From here, GBP is likely to trade sideways, even though the immediate bias is for it to probe the top of the expected 1.2430/1.2640 range first.
AUD/USD:
24-HOUR VIEW AUD is expected to consolidate its gains and trade sideways, likely within a 0.7035/0.7085. AUD not only rocketed past the strong 0.7050 resistance, it also cracked 0.7070 and registered a 3-month high of 0.7075. While further AUD gains would not be surprising in the coming days, the short-term rally is running too fast, too soon. That said, it is too early to expect a sustained pull-back. AUD is more likely to consolidate its gains and trade sideways at these higher levels. Expected range for today, 0.7035/0.7085.
1-3 WEEKS VIEW Strong upward pressure could lead AUD to 0.7110. After ‘hesitating’ below the major 0.7050/70 resistance zone for a couple of days, AUD suddenly blew past these major resistance levels and closed at a 3-month high of 0.7075 (thanks to dovish Fed-speak). As highlighted since Tuesday (16 Jul, spot at 0.7040), if AUD were to move and stay above 0.7070, it could extend its gains to 0.7110. All in, the mid to long-term outlook for AUD has turned brighter and if it can clear the major 0.7110 hurdle, it would suggest last month’s 0.6832 low could be a significant bottom (from the perspective of multiweeks). Meanwhile, the strong upward pressure in AUD could carry it higher to 0.7110 (next resistance is at 0.7150). On the downside, only a break of the 0.7000 ‘key support’ (level was a strong support at 0.6980 yesterday) would indicate that the current ‘positive phase’ in AUD has ended.
NZD/USD:
24-HOUR VIEW NZD is likely to consolidate its gains and trade sideways, likely within a 0.6755/0.6495 range. NZD cracked the 0.6740 resistance level convincingly and surged to a 3-1/2 month high of 0.6786. The rapid rise is running ahead of itself, further NZD gains appear unlikely for today. NZD is more likely to consolidate its gain and trade sideways, likely within a 0.6755/0.6795 range.
1-3 WEEKS VIEW Chance for NZD to extend its gains to 0.6815, as high as 0.6835. We have held the same view since Tuesday (16 Jul, spot at 0.6720) wherein a “sustained NZD strength only if NZD were to close above 0.6740 in NY”. We added yesterday (18 Jul, spot at 0.6730) that “if NZD were to close above 0.6740, a break of 0.6780 would not be surprising”. NZD subsequently surged during NY hours yesterday and quickly exceeded 0.6780 (high of 0.6786). The faster than expected pace of advance has resulted in a strong pick-up in momentum and from here, we see chance for NZD to extend its gains to 0.6815, even as high as 0.6835. Only a break of the 0.6725 ‘key support’ (level was a strong support at 0.6685 yesterday) would indicate that the current ‘positive phase’ has ended.
USD/JPY:
24-HOUR VIEW USD could dip below the overnight low of 107.20 but 107.00 would not be an easy While we expected USD to weaken yesterday, the rapid and sharp drop to an overnight low of 107.20 came as a surprise. Despite the bounce from the low, the underlying tone remains soft and from here, USD could dip below the overnight low but 107.00 would not be an easy support to crack. Resistance is at 107.75 followed by 108.00. The latter level is acting as a very strong resistance now.
1-3 WEEKS VIEW USD is expected to trade with a downside bias. The sideway-trading phase that started last Thursday (11 Jul, spot at 108.30) ended abruptly when USD crashed through the bottom of the expected 107.50/108.95 range and registered the largest 1-day decline in about one month (107.29, -0.60%). Despite the sharp decline, we have doubts about the sustainability of any USD weakness. That said, the immediate risk is tilted to the downside. For now, we expect USD to trade with a ‘downside bias’ towards last month’s 106.77 low. At this stage, the prospect for a sustained move below this level is not high. On the upside, only a move above the strong 108.20 resistance would indicate that the current downward pressure has eased.
