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Thomson Reuters
May 31 - 01:24 AM
First appeared on eFXplus on May 30 - 11:13 PM

EUR/USD: Bearish (since 23 May 18, 1.1778): Diminished odds for further EUR weakness.

EUR moved into a bearish phase when it broke clearly below the 1.1715 support level on 23 May. The subsequent sharp decline hit a multi-month low of 1.1506 on Tuesday (29 May) before staging a robust rebound yesterday. While the outlook is still deemed as bearish, the strong bounce coupled with oversold conditions suggests diminished odds for further EUR weakness. However, only a break of 1.1730 would indicate that a low is in place. In order to revive the current flagging momentum, EUR has to move and stay below 1.1560 within these few days or the risk of a short-term low would increase quickly.

GBP/USD: Bearish (since 01 May 18, 1.3765): Severely oversold but too early to expect a low.

The bearish phase that started earlier this month remains intact as GBP hit a fresh 2018 low of 1.3205 on Tuesday (29 May) before registering an ‘inside day’ yesterday. While the down-move is severely oversold, it is too early to expect a low. Only a break of 1.3360 would indicate that a short-term bottom is in place. Until then, another attempt to crack 1.3200 is not ruled out and a break of this level would shift the focus to 1.3150. That said, 1.3200 is rather strong level and this support would not be easy to break (shorter-term indicators suggest GBP could consolidate for a few days first at these lower levels).

AUD/USD: Neutral (since 11 May 18, 0.7525): Immediate bias is for a test of 0.7605.

The neutral phase that started in mid-May is still intact as AUD traded choppily within a broad sideway range since then. While upward momentum has improved with the strong rebound yesterday, it is too early to expect the start of a bullish phase. That said, the 0.7477 low registered yesterday is acting as a solid support now and as long as this level is intact, the immediate bias is for a test of the strong 0.7605 resistance. Higher up, only a break of 0.7645 would indicate that AUD is ready for a sustained up-move.

NZD/USD: Neutral (since 22 May 18, 0.6945): Recovery has room to extend to 0.7050.

After trading mostly sideways for past one week or so, NZD staged a robust rally yesterday and close sharply higher. The recovery appears incomplete and there is room for extension to 0.7050. Only a break back below 0.6910 would indicate that the immediate upward pressure has eased.

USD/JPY: Neutral (since 21 Feb 18, 107.35): Room for a deeper pull-back to 107.90.

The sharp pull-back from last week’s 111.39 peak is viewed as part of a broader consolidation phase. However, the pull-back has room to extend lower towards 107.90. At this stage, a sustained move below this level is not expected. Only a move above the key resistance at 109.60 would indicate that the current downward pressure has eased.

UOB Research/Market Commentary


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