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Thomson Reuters
Jan 08 - 01:24 AM
First appeared on eFXplus on Jan 07 - 10:00 PM

EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR has moved into a consolidation phase.

Despite the relatively strong advance of +0.71% yesterday (NY close of 1.1474), we have doubts about the sustainability of EUR strength. However, the current level of 1.1475 is not far from the top of our expected 1.1320/1.1500 consolidation range and a break of 1.1500 would not be surprising. We would adopt a more positive view on EUR if it can close above 1.1500 in NY but looking ahead, there are 2 major resistance levels sitting at 1.1550 followed by the critical level of 1.1620. At this stage, the prospect for a test of these major levels Is not high. In the meanwhile, we would continue to view the current price action as part of a consolidation phase.

GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP is expected to trade in a broad range.

There is not much to add to yesterday’s (07 Jan, spot at 1.2725) update. As highlighted, indicators are showing mixed signals and the current movement is viewed as part of a broad consolidation. That said, there is a slight upward bias even though at this stage, any GBP strength is viewed as part of a broad 1.2600/1.2850 range. Looking further ahead, a clear break above 1.2850 would suggest GBP is ready to stage a sustained recovery in the weeks ahead.

AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Outlook for AUD is slightly positive; a sustained move above 0.7205 seems unlikely.

As highlighted yesterday, the outlook for AUD is slightly positive but while further gain is not ruled out, a sustained move above the next major resistance at 0.7205 seems unlikely (at least for the next couple of weeks). On the downside, last Friday’s low near 0.6995 is acting a solid support now. On a shorter-term basis, 0.7055 is already a strong level.

NZD/USD: Neutral (since 07 Dec 18, 0.6880): Strong recovery in NZD has scope to extend higher. No change in view.

The break of the strong 0.6720 resistance last Friday (high of 0.6751) indicates that NZD has found short-term bottom at 0.6591 last Wednesday. The strong recovery has scope to extend further but at this stage, a sustained move above 0.6830 seems unlikely. Support is at 0.6675 but the stronger level is at 0.6645.

USD/JPY: Neutral (since 09 Oct 18, 113.10): USD is expected to trade sideways for now.

USD extended its ‘flash crash’ recovery as it closed higher for the second straight day (closed at 108.70, +0.16%). Despite the relatively positive price action, we still believe it is too soon to expect the start of a sustained USD rebound. From here, we continue to expect USD to trade sideways even though the improved underlying tone suggests that it would likely test the top of the expected 107.00/109.50 sideway-trading range first.

UOB Research/Market Commentary


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