EUR/USD: Bearish: Diminished odds for further EUR weakness.
We highlighted yesterday that “the next level to focus on is at 1.1800” but added that the “Dec 2017 low of 1.1715 could be out of reach”. The subsequent strong and sharp rebound that hit a high of 1.1946 was not expected (note that the +0.53% gain registered yesterday was the largest 1-day advance since late March). While the ‘stop-loss’ for our bearish view at 1.1960 is still intact, the price action suggests that the odds for further weakness have diminished. In order to ‘revive’ the rapidly waning downward momentum, EUR has to move and stay below 1.1845 within these 1 to 2 days or a break of 1.1960 would not surprise at all.
GBP/USD: Bearish (since 01 May 18, 1.3765): Still bearish but odds for further weakness to 1.3458 are not high. No change in view.
In the latest update on Tuesday (08 May, spot at 1.3560), we left off with the view that the outlook for GBP is “still bearish but odds for further weakness to 1.3458 are not high”. GBP subsequently traded sideways and shorter-term momentum has weakened further. From here, we continue to hold the view that the prospect for further weakness is not high. However, only a break of 1.3630 would indicate that the bearish phase has ended.
AUD/USD: Shift from bearish to NEUTRAL: AUD has moved into a correction/consolidation phase.
We highlighted yesterday (10 May, spot at 0.7460) that “another attempt to move below 0.7400 is not ruled but odds are not high” and added that AUD is likely “searching for a short-term low”. That said, the extent and rapid pace of the subsequent rebound in AUD that hit an overnight high of 0.7540 was not exactly expected (note that the +0.97% gain made yesterday was the largest 1-day advance since late March). While the ‘stop-loss’ for our bearish view at 0.7550 is still intact, the price action is enough to indicate that AUD has found a short-term low at 0.7413 on Tuesday (09 May). The current movement is viewed as the early stages of a correction/consolidation phase. Near-term, the immediate bias is tilted to the upside but at this stage, any advance in AUD is viewed as part of a 0.7440/0.7600 consolidation range and not the start of a bullish reversal.
NZD/USD: Bearish (since 02 May 18, 0.7005): NZD is expected to challenge the 0.6900 support. No change in view.
In the latest update on Tuesday (08 May, spot at 0.7020), we highlighted the “increasing risk of a short-term low” and added that “in order to revive the current flagging momentum, NZD has to stay below 0.7005 within these few days. NZD closed well below 0.7005 by the end of Tuesday and extended its decline to hit an overnight low of 0.6929 earlier this morning. From here, we are expecting NZD to challenge the next support at 0.6900 and a break of this level would shift the focus to 0.6865.
USD/JPY: Neutral (since 21 Feb 18, 107.35): Pressure shifted to the upside, a test of 110.45/50 would not surprise.
USD tried but failed to move convincingly above 110.00 (high of 110.01 yesterday). Despite the pull-back from the high, there is still chance for USD to test the strong 110.45/50 resistance (before a more sustained pull-back can be expected). Only a break of 109.00 would indicate that the current mild upward pressure has eased.