24-HOUR VIEW EUR is likely to trade sideways to slightly lower, expected to be between 1.1165 and 1.1220. Hint of possible rate cut by Draghi sent EUR plummeting to 1.1179. Despite the rapid drop, downward momentum has not improved by much and the risk of a sustained decline from here is not high. That said, it is too early to expect a recovery. EUR is more likely to trade sideways to slightly lower from here, expected to be between 1.1165/1.1220 range.
1-3 WEEKS VIEW Bias for is for EUR to move lower and test 1.1150. Despite relatively dovish remarks by Draghi, the decline in EUR was surprisingly subdued. The price action was more or less in line with our narrative from Monday (17 Jun, spot at 1.1215) wherein we expect EUR to trade with a “downside bias” and “test 1.1150”. EUR dropped to 1.1179 after Draghi’s remarks yesterday before recovering slightly. Downward momentum has increased albeit not by much and EUR is still expected to test 1.1150. A dip below this level is not ruled out but for now, the prospect for a break of the critical 1.1100 level is not high. On the upside, only a move above 1.1260 (level previously at 1.1290) would indicate that the current downward pressure has eased.
24-HOUR VIEW Robust rebound in GBP has scope to test 1.2600. Yesterday, we were of the view that “GBP is likely to weaken but oversold conditions could limit decline to 1.2500”. While our expectation was not wrong as GBP touched 1.2507, the subsequent robust rebound from the low came as a surprise. Downward pressure has dissipated and 1.2507 is deemed as a short-term bottom and this level is not expected to come into the picture for now. From here, the recovery has scope to extend and test 1.2600 but a sustained advance above this level is not expected (next resistance is at 1.2640). On the downside, 1.2535 is a strong support ahead of the 1.2507 low.
1-3 WEEKS VIEW GBP has moved into ‘negative phase’, could weaken to 1.2440. Our ‘upgrade’ of the downside narrative for GBP from “to trade with a downside bias” to “has moved into a ‘negative phase’” yesterday appears to be premature as GBP not only failed to break the 1.2500 support (overnight low of 1.2507) but also staged a robust rebound. In other words, the price action has dented the build-up in downward momentum and the odds for further GBP weakness to 1.2440 have diminished. However, only a break of 1.2640 (no change in ‘key resistance’ level) would indicate that the current ‘negative phase’ has ended. Meanwhile, GBP could trade sideways for a few days but it could not afford to consolidate for too long as it would lead to a rapid loss in momentum. To look at it another way, unless GBP can crack 1.2500 within the next few days, the risk of a move above the ‘key resistance’ would increase quickly.
24-HOUR VIEW NZD could move higher but any advance is viewed as part of a higher 0.6515/0.6550 range. Expectation for NZD to trade sideways yesterday was incorrect as it rose and hit an overnight high of 0.6538. The advance is running ahead of itself and while NZD could move above the overnight high, any strength is viewed as part of a higher 0.6515/0.6550 range and not the start of sustained rise.
1-3 WEEKS VIEW Prospect for further NZD weakness has diminished. Despite dropping sharply last Friday (14 Jun) and coming close to taking out the year-to-date low of 0.6482, NZD has not been able to make much headway on the downside. The sharp recovery yesterday (18 Jun) has diminished the prospect for further NZD weakness but confirmation of a short-term bottom is only upon a breach of the 0.6550 ‘key resistance’. In view of the waning downward momentum, a break of 0.6550 would not be surprising unless NZD can move and stay below 0.6515 within these 1 to 2 days.