EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR is on the defensive but odds for a break 1.1230 are low.
EUR briefly dipped to 1.1284 yesterday before recovering to end the day largely unchanged at 1.1305 (-0.01%). The price action reinforces our view that “EUR is likely to stay on the defensive but lackluster momentum suggests low odds of EUR breaking last month’s bottom near 1.1230” (see update from yesterday, 06 Mar). Overall, only a move above 1.1380 would indicate that the current mild downward pressure in EUR has eased. Looking forward, in the event of a ‘clear and clean’ break of 1.1230, it would greatly increase the risk of a move below the 2018 low of 1.1213 (next major mid to long-term support is at 1.1120).
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Short-term top in place; GBP is expected to trade sideways. No change in view.
While we indicated yesterday (05 Mar, spot at 1.3180) that the “the positive phase has ended” and last Wednesday’s 1.3351 peak is a “short-term top”, the subsequent rapid drop in GBP that hit a low of 1.3097 was not exactly expected. Despite the quick bounce from the low, the underlying tone has weakened considerably. That said, it is premature to expect a sustained down-move. For now, we continue to expect GBP to “trade sideways” even though after yesterday’s price action, the expected range has shifted lower to 1.3000/1.3260 (previously at 1.3070/1.3300).
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): 0.7010 is likely to come into the picture sooner than expected.
We indicated yesterday (06 Mar, spot at 0.7080) that “AUD has to break clearly below last month’s low near 0.7055 in order to indicate that it is ready to move to the next support at 0.7010”. However, the subsequent sharp and rapid plunge in AUD that sliced through 0.7055 was not exactly expected. The price action suggests that 0.7010 is likely to come into the picture sooner than expected. Looking ahead, a break of 0.7010 would suggest AUD is ready to tackle the next support at 0.6970. In order to maintain its current momentum, AUD should not move back above 0.7110. Short-term, 0.7070 is already a strong level.
NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD to stay on the defensive but expect 0.6720 to offer solid support.
NZD dropped to 0.6753 before ending the day on a soft note (NY close of 0.6769, -0.42%). The weak underlying tone highlighted yesterday has softened further and the risk of a break of the bottom of our expected 0.6740/0.6870 consolidation range at 0.6740 has increased. However, last month’s 0.6720 low is a strong level and is expected to offer solid support. Only a clear break of this level would indicate that NZD is ready to move lower in a sustained manner. Meanwhile, NZD is expected to stay on the defensive unless it can move above 0.6840.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD is expected to advance but may find it difficult to break solid 112.00/20 zone. No change in view from yesterday, see reproduced update below. USD has to ‘surge’ higher soon or a break of 111.30 would indicate that a short-term top is in place.
USD edged above 112.00 for the third straight day yesterday (05 Mar) as it touched 112.12. However, the advance was once again short-lived (USD pulled back to end the day at 111.89). The price action is in line with our view from last Friday (01 Mar, spot at 111.40) wherein “USD is expected to advance but may find it difficult to break the solid 112.00/20 zone”. From here, a clear break of the 112.00/20 zone is not ruled out but upward pressure is beginning to wane and unless USD can ‘surge’ higher within these 1 to 2 days, the prospect for a break above the resistance zone would decrease quickly. Conversely, a break of the 111.30 ‘key support’ (level was at 111.10 yesterday) would indicate that a short-term top is in place.