GBP/USD: The next support below 1.2110 is at 1.1985.
While we held the view yesterday (30 Jul, spot at 1.2225) that GBP has moved into a ‘negative phase’ and that it “could trade to 1.2110”, the subsequent rapid pace of decline was not exactly expected (GBP plunged to an overnight low of 1.2120). The downward acceleration over the past couple of days could be attributed to the lack of significant support levels. From here, if GBP were to crack 1.2110, it could lead to further steep decline as the next support is more than 100 pips lower at 1.1985. That said, 1.1985 is just a minor low in Jan 2017 (on the weekly chart) and it is left to be seen how much support it can offer (if GBP were to move to this level). Below this level, the more significant support would be the Oct 2016 ‘flash crash’ low of 1.1491. All in, despite being oversold, the current weakness in GBP is not showing sign of stabilizing just yet. Only a break of the 1.2295 ‘key resistance’ (level was at 1.2335 yesterday) would suggest that the decline in GBP is ready to take a breather.
AUD/USD: AUD could weaken further but expect strong support at 0.6830.
Our latest narrative was from Monday (29 Jul, spot at 0.6910) wherein AUD “could weaken further to 0.6870 but expect solid support near 0.6830”. AUD extended its losing streak as it touched 0.6869 yesterday (30 Jul) before closing lower for the 8 straight day. While the decline is overextended, there is still no sign of stabilization and AUD could weaken further in the coming days. That said, we continue to expect 0.6830 to offer solid support (in other words, the prospect for a sustained decline below this level is not high). On the upside, AUD has to break the 0.6945 ‘key resistance’ (level previously at 0.6975) in order to indicate that the weakness has stabilized.
NZD/USD: Mid-July low near 0.6565 is unlikely to come into the picture unless there is a NY close below 0.6610.
While NZD dipped below 0.6610 and touched 0.6602 yesterday (30 Jul), it recovered slightly and closed at 0.6615 in NY. As highlighted on Monday (29 Jul, spot at 0.6635), the mid-July low near 0.6565 is unlikely to come into the picture unless there is a NY close below 0.6610. After yesterday’s price action, the prospect for a move to 0.6565 has increased. All in, the weakness in NZD that started a week ago (24 Jul, spot at 0.6705) is deemed as intact unless NZD can move above the 0.6650 ‘key resistance’ (level was previously at 0.6690).