EUR/USD: Neutral (since 21 Aug 18, 1.1485): Further EUR strength to 1.1850 seems likely.
We have held the same view since last Friday (see update on 14 Sep, spot at 1.1690) wherein the “probability for a move to 1.1790 has increased”. EUR subsequently traded sideways for several days and our resolve was tested as we indicated yesterday (20 Sep, spot at 1.1680) that the “prospect for further EUR strength has diminished”. Just when we thought time was running out for our view to work out, EUR rocketed and blast past the strong 1.1725/35 resistance zone and hit a high of 1.1785 (holding just a few pips below 1.1790). The outsized rally (the +0.88% up-move yesterday was the largest 1-day gain in 3 months) coupled with the break of strong resistance levels indicates scope for further EUR strength towards the next resistance at 1.1850 (June’s peak). All in, we expect EUR to trade on a firm footing from here and only a break of 1.1690 (‘key support’ previously at 1.1640) would indicate that the current EUR strength has run its course.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Scope for further GBP strength to 1.3365.
We have held a ‘positive’ GBP view since last Tuesday (11 Sep, spot at 1.3025) wherein we indicated the “corrective rebound could extend to 1.3170”. We added on Tuesday (18 Sep, spot at 1.3150) that despite being overbought, the advance has scope to extend towards 1.3215. When GBP dropped sharply from an exact high of 1.3215, we indicated yesterday (20 Sep, spot at 1.3140) that “the risk of a short-term top has increased”. Despite our reservation, GBP punched above 1.3215 and hit an overnight high of 1.3295. The sharp and impulsive rally suggests there is scope for further GBP strength to the July’s peak of 1.3363. That said, as the rally is in overbought territory now, GBP has to continue to move higher in the next few days as a prolonged consolidation would quickly increase the risk of a short-term top. All in, we will continue to hold a ‘positive’ GBP view as long as the ‘key support’ at 1.3170 is intact (level previously at 1.3060).
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Risk of a stronger recovery has increased.
We indicated yesterday (20 Sep, spot at 0.7260) that the “risk of a stronger recovery has increased” and “a break above 0.7280 would suggest the recovery could extend higher to 0.7360”. AUD subsequently cracked the 0.7280 resistance as it hit an overnight high of 0.7293. In other words, the focus now is for the current recovery in AUD to extend to 0.7360. Only a break of the ‘key support’ at 0.7220 would indicate that a short-term top is in place.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Further NZD strength to 0.6730 would not be surprising.
We indicated yesterday (20 Sep, spot at 0.6635) that a daily closing above 0.6655 would suggest NZD could continue to head higher to 0.6705. NZD cracked 0.6655 without much difficulty and ended the day on a solid note (NY close of 0.6686, +1.10%). From here, 0.6705 appears to be within reach and we see room for further NZD strength to 0.6730. All in, there is no indication that the current positive tone in NZD is about to end and only a break of 0.6620 (‘key support’ previously at 0.6575) would suggest that a short-term top is in place.
USD/JPY: Neutral (since 23 Jul 18, 111.20): Upward momentum has improved, risk is still clearly on the upside.
We highlighted on Wednesday (19 Sep, spot at 112.30) that “upward momentum has improved” and “risk is still clearly on the upside”. We added, “a move above 112.60 would not be surprising but there is another strong resistance level at 112.80 and this level may not yield so easily”. USD came close to 112.60 as it hit an overnight high of 112.58. Despite the generally positive price action, we continue to see solid resistance at 112.80 and while an intraday move above this level would not be surprising, we doubt USD can maintain a toehold above this level. Note that there is another very strong resistance at 113.15 (July’s peak). All in, the current positive outlook for USD is deemed as intact until the ‘key support’ at 111.75 is taken out (level previously at 111.55).