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Thomson Reuters
Mar 01 - 09:48 AM
First appeared on eFXplus on Feb 28 - 10:04 PM

EUR/USD: Neutral (since 21 Aug 18, 1.1485): Odds for a break of 1.1440 are slightly more than even.

EUR is clearly struggling to maintain its upward momentum as it advanced to a high of 1.1420 yesterday before surrendering all of its gains to close largely unchanged. The price action is not surprising as we highlighted in recent updates that EUR is “expected to struggle to break 1.1440”. For now, we continue to hold the view that the “odds for a break of 1.1440 are slightly more than even” but time is not on the side for those anticipating a stronger EUR. To look it another way, unless EUR closes above 1.1400 by end of today’s NY session, we would shift our view to that “EUR has moved into a consolidation phase”. Conversely, we would come to the same conclusion if there is a break of the 1.1310 ‘key support’ (no change in level).

GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Further GBP strength is still likely but 1.3365 may not come into the picture so soon. No change in view.

The pace of the expected GBP strength continues to surprise us as it closed higher for the fourth straight day and tacked on a gain of +0.46% (NY close of 1.3311). As highlighted yesterday (27 Feb, spot at 1.3255), the ‘positive’ outlook for GBP that started last Wednesday (20 Feb, spot at 1.3070) is still intact even though we were the view that “1.3365 may not come into the picture so soon”. GBP subsequently touched 1.3351 during NY hours before easing off. Severely overbought short-term conditions could lead to a couple of days of consolidation first but as long as the ‘key support’ at 1.3170 remains intact (level was at 1.3120 yesterday), we expect GBP to move above 1.3365 eventually. The next significant resistance above 1.3365 is at 1.3470.

AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD has moved into a consolidation phase.

AUD tested the bottom of our expected 0.7090/0.7230 consolidation range (first indicated on Tuesday, 26 Feb) as it touched an exact low of 0.7090 during NY hours. While downward momentum has ticked higher, it is too soon to expect the start of a sustained directional move in AUD. Only a break of last month’s low near 0.7055 would suggest AUD is ready to move lower in a sustained manner. At his stage, the prospect for such a move is not high. Meanwhile we continue to hold the view that AUD is trading in a consolidation phase even though likely at a lower range of 0.7055/0.7170.

NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD is expected to trade sideways.

The break of the 0.6820 ‘key support’ yesterday has put paid to our expectation for NZD to move above 0.6900. As highlighted yesterday (28 Feb), “a break of 0.6820 would indicate that NZD could continue to trade sideways within a broad range”. In other words, for the next 1 to 2 weeks, NZD is expected to trade sideways, likely between 0.6740 and 0.6870.

USD/JPY: Neutral (since 09 Oct 18, 113.10): USD is expected to advance but may find it difficult to break solid 112.00/20 zone.

The sudden and strong surge in USD yesterday that cracked the late-December high of 111.40 came as a surprise (overnight high of 111.49). We indicated on Wednesday (27 Feb) that the “price action near the bottom/top of the expected 110.00/111.05 range should provide a better clue on the likely direction of the next move”. Yesterday’s movement indicates that USD is ready to advance further in the coming days. That said, upward momentum has not improved by that much and any advance is may find it difficult to break the solid 112.00/20 resistance zone. On the downside, only a break of the 110.65 ‘key support’ would indicate that the current upward pressure has eased. Short-term, 110.95 is already a strong support level.

UOB Research/Market Commentary


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