EUR/USD: Neutral (since 14 May 18, 1.1950): EUR has moved into a consolidation/correction phase. No change in view.
In last Friday’s update (11 May, spot at 1.1920), we highlighted “the diminished odds for further EUR weakness” and the subsequent break of 1.1960 confirms that the bearish phase that started earlier this month has ended. The outlook for EUR is deemed as neutral now and last week’s 1.1821 low is viewed as a short-term bottom. To look at it another way, the decline that started in mid-April from a high of 1.2413 has likely found a base at 1.1821 and from here, we believe EUR has moved into a consolidation/correction phase. That said, the immediate bias is tilted to the upside even though any advance is viewed as part of a 1.1850/1.2050 correction/consolidation phase and not the start of a bullish reversal.
GBP/USD: Bearish (since 01 May 18, 1.3765): Still bearish but odds for further weakness to 1.3458 are not high. No change in view.
We have held the same view since 04 May (spot at 1.3570) that while the outlook for GBP is still deemed as bearish, the odds for further weakness to the year-to-date low of 1.3458 are not high. Since then, GBP traded mostly sideways before dipping to a low of 1.3460 last Thursday (10 May). The subsequent rapid bounce from the low continues to suggest that the prospect for further GBP decline is not high. However, only a break of 1.3630 would indicate that the current bearish phase has ended. Until then, another attempt to 1.3455/60 is not ruled but based on the current lackluster momentum, we continue to have doubts that GBP can break below this level convincingly.
AUD/USD: Neutral (since 11 May 18, 0.7525): AUD has moved into a correction/consolidation phase. No change in view.
We just shifted to a neutral stance last Friday (11 May, 0.7525) and there is no change to the view. As indicated, AUD has likely found a short-term base at 0.7413 last Tuesday (09 May). The current movement is viewed as the early stages of a correction/consolidation phase. Near-term, the immediate bias is tilted to the upside but at this stage, any advance in AUD is viewed as part of a 0.7440/0.7600 consolidation range and not the start of a bullish reversal.
NZD/USD: Bearish (since 02 May 18, 0.7005): A move below 0.6900 seems likely now but 0.6850 could be out of reach.
We highlighted yesterday that the odds for a NZD weakness below major 0.6900 support have diminished. The subsequent sharp decline that hit an overnight low of 0.6911 came as a surprise and has reinvigorated the flagging downward momentum. That said, indicators are still at rather oversold level and while a move below 0.6900 seems likely now, the next support at 0.6850 could be out of reach. On the upside, the ‘stop-loss’ for our bearish view is adjusted to 0.6975 (from 0.7005 previously).
USD/JPY: Neutral (since 21 Feb 18, 107.35): Pressure shifted to the upside, a test of 110.45/50 would not surprise.
We have held the same view since last Thursday (10 May, spot at 110.75) wherein the immediate upward pressure could lead to a test of the major 110.45/50 resistance. Since then, the advance in USD been capped by the 110.00 level but in view of the still positive outlook, we continue to expect a move to 110.45/50. At this stage, a sustained move above this level is not expected. Only a move back below 109.00 would indicate that the current mild upward pressure has eased.