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Thomson Reuters
Jul 12 - 01:24 AM
First appeared on eFXplus on Jul 11 - 11:48 PM

EUR/USD: Neutral (since 05 Jun 18, 1.1700): Still neutral; EUR to trade sideways from here.

We highlighted yesterday that “EUR could still stage another attempt to break 1.1790 but this has to happen within these 1 to 2 days”. Time has run out for those looking for a higher EUR as the break of the ‘key support’ at 1.1680 suggests that Monday’s (09 Jul) 1.1790 high is a short-term top. At this stage, there is no change to the current neutral outlook but EUR has likely moved into a broad sideway consolidation range. In other words, we expect EUR to trade sideways from here, likely within a 1.1590/1.1760 range.

GBP/USD: Neutral (since 25 Jun, spot at 1.3265): Upward pressure has eased, GBP has moved into a consolidation phase.

There is not much to add as GBP traded in a relatively quiet manner over the past couple of days. We continue to hold the view that GBP has moved into a consolidation phase and is expected to trade sideways, likely within a broad 1.3150/1.3350 range.

AUD/USD: Neutral (since 05 Jul 18, 0.7380): Current soft patch in AUD could test the major 0.7300 support.

We highlighted yesterday that the “upward pressure has eased” and AUD has likely moved into a consolidation phase. The subsequent outsized decline that hit an overnight low of 0.7364 came as a surprise. This level is just above our expected 0.7350/0.7480 consolidation range and in view of the rapid pace of decline; a move below 0.7350 would not be surprising. That said, we are not convinced that the current weakness is the start of a fresh bearish phase even though the current soft patch could extend lower and test the major 0.7300 support. On the upside, only a move above 0.7440 would indicate that the current weakness has stabilized.

NZD/USD: Neutral (since 06 Jul, 0.6795): Scope for a test of 0.6675 but prospect is not high.

While we noted yesterday that the “recent upward pressure has eased” and “NZD is likely to trade sideways within a 0.6750/0.6860 range”, the rapid pace of the decline that quickly came close to the bottom of the expected range was not exactly anticipated (overnight low of 0.6754, as NZD lost a whopping -1.17%). Despite the sharp drop, we are not convinced that the current weakness in NZD is the start of a fresh bearish phase. That said, there is scope for a test of the major 0.6675 level even though the prospect for such a move is not high (on a shorter-term note, 0.6690 is already as strong support). On the upside, NZD has to move and stay above 0.6825 in order to indicate that the current downward pressure has eased.

USD/JPY: Shift from neutral to BULLISH: USD turned bullish with impulsive break of major 111.50 resistance.

While our recent expectation for “USD to stay supported” was correct, the manner of which it blast past the major 111.50 resistance yesterday came as a rather big surprise. This level is close to a major declining trend-line on the weekly chart that stretches back to Aug 2015 and the impulsive break of this solid resistance and the subsequent strong daily closing suggests that USD has moved into a bullish phase (note that USD has broken above the weekly Ichimoku cloud as well). The immediate ‘target’ is at 113.40.

UOB Research/Market Commentary


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