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Jun 21 - 09:48 AM
Tech Targets: EUR/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on Jun 21 - 07:24 AM

EUR/USD: 

24-HOUR VIEW Rally is overstretched but EUR could edge above 1.1320. Instead of “testing 1.1260”, EUR blew past the relatively strong resistance and surged to 1.1317. The rally seems to be overstretched but currently is not showing sign of easing off just yet. For today, barring a move below 1.1255, EUR could edge above the 1.1320 resistance. The next resistance at 1.1350 is likely out of reach.

1-3 WEEKS VIEW EUR is likely to move into ‘positive phase’ soon. We indicated yesterday (20 Jun, spot at 1.1240) that EUR has “moved into a sideway-trading phase” and is expected to “trade within a 1.1180/1.1320 range”. The rapid pace of which the top of the range was tested came as a surprise as EUR touched 1.1317 yesterday. Upward momentum has ticked up and if EUR were to register a NY closing above 1.1320 in NY, it would indicate the start of a ‘positive phase’ that could take out the month-to-date high near 1.1350. This scenario appears likely unless EUR were to move and stay below 1.1220 within these few days.

AUD/USD: 

24-HOUR VIEW AUD could edge higher towards 0.6950. Expectation for AUD to trade sideways yesterday was incorrect as it rose strongly to 0.6936. While upward momentum has not improved by all that much, AUD could edge higher towards 0.6950. At this stage, a sustained rise above this level is not expected. On the downside, only a move below 0.6880 would indicate that the current mild upward pressure has eased (minor support is at 0.6900).

1-3 WEEKS VIEW AUD has moved into a sideway-trading phase, likely to probe the top of the range first. We warned of the “diminished odds for further AUD weakness” yesterday and while AUD only moved one pip above the 0.6935 ‘key resistance’, the ‘negative phase’ that started on 18 Jun (spot at 0.6855) is deemed to have ended. From here, AUD has likely moved into a ‘sideway-trading phase’ even though the improved underlying tone suggests it is likely to probe the top the expected 0.6860/0.6980 range first.

NZD/USD: 

24-HOUR VIEW NZD is likely to consolidate its gains and trade sideways at these higher levels, likely between 0.6575 and 0.6620. We highlighted yesterday there is “scope for NZD to test 0.6590” and added, “a sustained advance above this level is not expected”. NZD subsequently touched 0.6596 before ending the day on a firm note. The rally in NZD is severely overbought but in view of the strong momentum, it is unlikely to ease off so soon. NZD is more likely to consolidate its gains and trade sideways at these higher levels, expected to be between 0.6575 and 0.6620.

1-3 WEEKS VIEW Recovery in NZD could test 0.6620. While we indicated yesterday (20 Jun, spot at 0.6555) that “the recovery in NZD could test 0.6620”, the rapid advance of +0.70% (NY close of 0.6585) was not exactly expected. Upward momentum has improved further and from here, a break of 0.6620 would indicate the start of ‘positive phase’ that could challenge the month-to-date high near 0.6680. The prospect for such a scenario is not very high for now but it would continue to increase as long as NZD does not move back below 0.6540 (level was at 0.6515 yesterday).

USD/JPY: 

24-HOUR VIEW USD is likely to consolidate its loss and trade sideways. We clearly underestimated the strength of the decline in USD as it sliced through several strong support levels with ease. The drop to 107.20 is deep in oversold territory and the next support at 107.00 is unlikely to come under serious threat. All in, USD is more likely to consolidate its loss and trade sideways, likely between 107.00 and 107.65.

1-3 WEEKS VIEW Break of 107.00 would shift focus to 106.60. No change in view from yesterday, see reproduced update below. However, ‘key resistance’ has moved lower to 108.00 from 108.50 and a break of 107.00 would shift focus to 106.60.

After the sharp drop in USD earlier this month (03 Jun, spot at 108.30), we were of the view that USD has moved into a ‘negative phase’ and expected a move to 107.70 followed by 107.50. USD subsequently touched 107.80 on 05 Jun before trading sideways for a relatively long period. The prolonged consolidation led us to warn last Monday (10 Jun) that the “odds for further USD weakness have diminished”. However, we added, only a break of the 109.05 key resistance’ would indicate that the ‘negative phase’ has ended. At the time of writing, USD lurched lower and just cracked 107.80. Downward momentum has picked up quickly and from here, a break of 107.50 would open up the way for further USD weakness to 107.00. On the upside, the ‘key resistance’ finally moved lower, to 108.50 from 109.05.

Source:
UOB Research/Market Commentary

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