EUR/USD: Room for EUR to revisit 1.1174.
We highlighted in recent updates that a NY closing below 1.1220 would indicate that EUR is ready to “revisit the 07 Mar low of 1.1174”. While EUR closed marginally lower by -0.02% (1.1217) in NY last Friday, it is enough to indicate that there is room for EUR to revisit 1.1174. That said, downward momentum has not improved by much and the prospect for a sustained decline below 1.1174 is not high (next support levels are at 1.1145 followed 1.1110). On the upside, a move above 1.1300 would indicate the current mild downward pressure has eased.
GBP/USD: Risk of a break below 1.2950 has increased.
GBP dropped to 1.2977 last Friday before rebounding quickly to end the day largely unchanged at 1.3037 (-0.04%). The 1.2977 low is not far above the bottom of our expected 1.2950/1.3400 broad sideway trading range. We highlighted last week, “a break below 1.2950 would increase the risk for a sustained period of GBP weakness” and added, “the prospect for such a scenario is not high but it would increase quickly unless GBP can recover back above 1.3190 within the next few days”. While the narrative remains largely unchanged, downside risk has increased and would continue to increase unless GBP can move back above 1.3160 (from 1.3190) soon. Looking ahead, a break of 1.2950 would suggest GBP has room to move to 1.2880.
AUD/USD: No clear direction, AUD is expected to trade sideways.
After two days of decline, AUD closed higher last Friday at 0.7097 (+0.31%) and extended its gain early this morning. From a perspective of 2-3 days, improved momentum indicators suggest the risk is tilted to the upside. However, from a multi-week perspective, there is no clear direction (we have held the same view since last Monday, 25 Mar, spot at 0.7080). In other words, AUD is expected to continue to trade sideways, likely between 0.7040 and 0.7190.
NZD/USD: Strong drop could test the early-March low of 0.6745. No change in view.
After rebounding briefly to a high of 0.6828 yesterday (28 Mar), NZD dropped back quickly and hit a low of 0.6775. The price action reinforces our view wherein the strong decline post-RBNZ could lead to a test to the 0.6745 low registered in early-March (see update on Wed, 27 Mar). A break of 0.6745 is not ruled out but there is another strong support at 0.6720 (low in February) and the prospect for a break of the latter level is not high. On the upside, the ‘key resistance’ has moved lower to 0.6860 from 0.6910 previously.
USD/JPY: USD has moved into a sideway-trading phase.
There is not much to add as USD tested the strong 110.95 resistance last Friday (high of 110.94) before breaking it early this morning. As highlighted last Friday, USD has likely moved into a sideway-trading phase and is expected to trade sideways, expected to be within a broad 110.00/111.50. Looking ahead, ‘flat’ momentum indicators suggest USD could trade sideways for a protracted period and only a break out of last month’s 109.70/112.12 range would indicate that USD is ready for a directional move.