EUR/USD: Neutral (since 21 Aug 18, 1.1485): Further EUR strength to 1.1850 seems likely.
There is not much to add to last Friday’s update (21 Sep, spot at 1.1775). As highlighted, the recent strength in EUR has scope to extend towards the next resistance at 1.1850. EUR briefly touched a high of 1.1815 during NY hours yesterday and despite the relatively rapid and sharp pull-back from the top, the positive underlying tone remains intact. However, short-term indicators are unwinding from overbought conditions and this could lead to a couple of days of consolidation first. As long as the ‘key support’ at 1.1690 is intact (level remains unchanged as previously), we continue to see chance for EUR to move to 1.1850.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP has moved into a consolidation phase.
In our last update on Friday (21 Sep, spot at 1.3270), we expected GBP to extend its gains to the July’s peak of 1.3363. GBP subsequently staged an outsized decline that easily took out the 1.3170 ‘key support’ (low of 1.3041 on Friday). While there is no change to the neutral outlook, the break of the ‘key support’ indicates that GBP has likely made a short-term top at 1.3295 last week. The current movement is viewed as the early stages of a consolidation phase and GBP is expected to trade sideways to slightly lower from here, likely within a broad 1.3020/1.3220 range.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Risk of a stronger recovery has increased.
We have held the same view since last Thursday (20 Sep, spot at 0.7260) wherein the “risk of a stronger recovery in AUD has increased”. AUD subsequently hit a high of 0.7305 on Friday (21 Sep) before easing off. While upward pressure has waned somewhat with the pull-back from 0.7305, there is still room for the current recovery to extend to 0.7360. That said, any advance is expected to be slow and grinding. On the downside, only a break of 0.7220 (no change in ‘key support’ level) would indicate that a short-term top is in place.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Diminished odds for further NZD strength.
The relatively large decline of -0.65% yesterday (NY close of 0.6641) came as a surprise. However, as indicated last Friday (21 Sep, spot at 0.6685), only a break of the 0.6620 ‘key support’ would suggest that a short-term top is in place. Until then, we continue to see chance for further NZD strength to 0.6730 even though the odds for such a move have diminished.
USD/JPY: Neutral (since 23 Jul 18, 111.20): A break above the July’s peak near 113.15 would not be surprising.
We have held the same view since last Wednesday (19 Sep, spot at 112.30) wherein upward momentum for USD has improved and the “risk is clearly on the upside”. That said, we have doubts on whether USD can maintain a toehold above the major 112.80 resistance (see last Friday’s update). USD rebounded strongly after dipping to a low of 112.26 yesterday (24 Sep) and the advance from the low is gaining momentum. From here, the focus has shifted to the July’s peak near 113.15 and in view of the improved momentum, a break above this level would not be surprising. However, there is another strong resistance at 113.45 and this level may not yield so easily. All in, we continue to hold a ‘positive’ stance as long as the ‘key support’ at 112.15 is intact (level previously at 111.75).