EUR/USD: Neutral (since 14 May 18, 1.1950): Immediate pressure is on the downside. No change in view.
We highlighted yesterday (16 May, 1.1830) that the “immediate pressure is on the downside” and added, “further weakness to 1.1750 would not be surprising”. EUR subsequently hit a low of 1.1761 before rebounding. The price action reinforces our view wherein while the near-term outlook for EUR is negative, any weakness is unlikely to have enough momentum to move below last December’s low of 1.1715 (1.1750 is already a solid support). On the upside, only a move back above the ‘key resistance’ at 1.1900 (level adjusted lower from 1.1940) would indicate that the current downward pressure has eased.
GBP/USD: Bearish (since 01 May 18, 1.3765): GBP has to move lower soon or the risk of a short-term low would increase quickly.
After edging below the January’s low of 1.3458 on Tuesday (15 May), GBP has been unable to make much headway on the downside. The lack of a follow-through and the subsequent sideway trading has resulted in a rapid loss in downward momentum. In order to revive the flagging momentum, GBP has to move and stay below 1.3470 within these 1 to 2 days or further consolidation around these levels would quickly increase the odds for a short-term low. Conversely, a move above 1.3600 would indicate that the current bearish phase has ended.
AUD/USD: Neutral (since 11 May 18, 0.7525): AUD to consolidate and trade sideways for now.
The break of the 0.7540 ‘key resistance’ yesterday indicates that the recent mild downward pressure has eased. However, there is no change to the neutral outlook for AUD even though it is expected to consolidate and trade sideways for now, likely between 0.7445 and 0.7580 (we previously saw chance for a probe of the major 0.7400 level).
NZD/USD: Bearish (since 02 May 18, 0.7005): Time running out for NZD bears.
NZD touched a high of 0.6938 yesterday, just a couple of pips below the ‘stop-loss’ for our bearish view at 0.6940. While NZD subsequently moved lower and closed on a soft note, downward momentum has waned considerably and the odds for further weakness to 0.6800 have diminished. From here, unless NZD can smash through and hold below the 0.6850/55 support within these 1 to 2 days, a break of the 0.6940 would not be surprising. In other words, time appears to be running out for NZD bears.
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD could be on the cusp of entering a bullish phase.
While we detected the shift in pressure to the upside last Thursday (10 May, spot at 110.75), the extent and rapid pace of the rise in USD since then is not exactly expected. However, we did note on Wednesday (16 May, spot at 110.25) that “further USD strength to 111.00 is not ruled out” and now that we are approaching this level, there is no sign that USD is slowing down. From here, it looks increasing likely that USD is on the cusp on entering a bullish phase. Confirmation of a shift to bullish phase is upon a NY close above 111.00 and the immediate target would be at 112.00 (even though 111.50 may not be easy to crack). On the downside, only a break below 110.00 would indicate that the current upward pressure has eased. On a shorter-term note, 110.25 is already a strong support level.