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Thomson Reuters
Apr 03 - 01:24 AM
First appeared on eFXplus on Apr 02 - 11:01 PM

EUR/USD: Room for EUR to revisit 1.1174.

EUR dipped to 1.1181 during NY hours before recovering quickly to end the day little changed. The price action is in line with our expectation wherein there is room for EUR to revisit last month’s 1.1174 low. However, as highlighted previously, downward momentum is lackluster and the prospect for a sustained decline below 1.1174 is not high (next support levels are at 1.1145 followed by 1.1110). On the upside, a move above the 1.1255 ‘key resistance’ (level previously at 1.1275) would indicate that the current mild downward pressure has eased.

GBP/USD: Risk of a break below 1.2950 has increased.

GBP dipped to 1.3015 before rebounding strongly to hit an overnight high of 1.3150. Downward pressure has eased and a break of the 1.3160 ‘key resistance’ (no change in level) would indicate that GBP is not ready to challenge the 1.2950 level. In order to revive the current flagging momentum, GBP has to move and stay below 1.3045 or a break of 1.3160 would suggest GBP is still trading sideways within a very broad range (instead of trying to break below the 1.2950 level).

AUD/USD: No clear direction, AUD is expected to trade sideways.

After trading with a positive bias for a couple of days, AUD slumped quickly and hit an overnight low of 0.7052. The price action reinforces our view wherein there is “no clear direction” and AUD is expected to trade sideways between 0.7040 and 0.7190 (same view since last Monday, 25 Mar, spot at 0.7080). That said, after the relatively large decline yesterday, AUD is unlikely to visit 0.7190 anytime soon.

NZD/USD: Prospect for a sustained drop below the 0.6700/20 support zone is not high.

We have held the same view since last Wednesday (27 Mar, spot at 0.6830) wherein the strong decline post-RBNZ could lead to a “test of the 0.6745 low registered in early-March”. After about a week, NZD dropped to 0.6739 during overnight trading. As highlighted previously, a break of 0.6745 would not be surprising but the 0.6720 low in February is another strong support. Further down, there is another strong level at 0.6700 and the prospect for a sustained drop below this 0.6700/0.6720 support zone is not high. However, NZD has to move above 0.6820 (‘key resistance’ previously at 0.6860) to indicate that the current weak phase has stabilized.

USD/JPY: USD has moved into a sideway-trading phase. No change in view from yesterday, see reproduced update below.

USD soared and hit an overnight high of 111.44, just below the top of our expected 110.00/111.50 sideway-trading range. The rapid rise has increased the odds for further USD strength even though we have doubts about the sustainability of any advance. For now, we continue to hold the view that USD is ‘trading sideways’ but if USD were to close above 111.70, it would be a good indication that USD is ready to challenge last month’s 112.12 peak. The prospect for a higher USD is not that high but it would increase quickly as long as it doesn’t move back below 110.80 within these couple of days

UOB Research/Market Commentary


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