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Jun 18 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, USD/JPY - UOB
First appeared on eFXplus on Jun 18 - 12:00 AM

EUR/USD: 

24-HOUR VIEW EUR is likely to trade sideways, expected to be between 1.1200 and 1.1250. We highlighted yesterday that EUR “could dip below 1.1200 but the next support at 1.1170 is unlikely to come into the picture”. However, EUR only touched 1.1220 before staging a mild recovery. While downward pressure has waned, it is too soon to expect a sustained rebound. EUR is more likely to trade sideways at these lower levels, expected to be between 1.1200 and 1.1250.

1-3 WEEKS VIEW Bias for is for EUR to move lower and test 1.1150. There is not much to add to the update from yesterday (17 Jun, spot at 1.1215) as EUR traded in a quiet manner before ending the day a tad higher at 1.1217 (+0.08%). As indicated, the immediate bias for EUR has shifted to the downside but we do not expect any weakness to be sustained and we see low chance of EUR threatening the critical 1.1100 support. However, a test of 1.1150 would not be surprising. On the upside, only a move above 1.1290 would indicate that the current mild downward pressure has eased.

GBP/USD: 

24-HOUR VIEW GBP is likely to weaken but oversold conditions could limit decline to 1.2500. The sudden lurch lower in GBP that hit 1.2532 came as a surprise. While momentum has picked up considerably, the current weakness in GBP is still deep in oversold territory and any further decline is likely limited to a test of 1.2500 (next support is at 1.2470). On the upside, yesterday’s peak near 1.2605 is not expected to be challenged (1.2570 is already quite a strong level).

1-3 WEEKS VIEW GBP has moved into ‘negative phase’, could weaken to 1.2440. While the downward movement in GBP is line with our expectation, the pace of the decline was not expected. We indicated yesterday (17 Jun, spot at 1.2590) that GBP is expected to “trade with a downside bias” and added, “a break of 1.2500 is unlikely”. In that context, the sharp decline of 0.46% and the subsequent weak daily closing of 1.2533 in NY (just one pip above the overnight low of 1.2532) came as a surprise. The rapid improvement in momentum suggests GBP has move into a ‘negative phase’ and a break of 1.2500 could lead to further GBP weakness to 1.2440. The early January ‘flash crash’ low of 1.2410 could be just out of reach for the current ‘negative phase’. All in, GBP is expected to stay under pressure unless it can move above the 1.2640 ‘key resistance’.

AUD/USD: 

24-HOUR VIEW AUD could continue to move lower but 0.6810 is unlikely to come into the picture for today. Despite being severely oversold, the weakness in AUD extended to 0.6849. Downward momentum appears to be struggling and while AUD could continue to move lower, the next support at 0.6810 is unlikely to come into the picture for today (minor support at 0.6830). Resistance is at 0.6875 followed by 0.6900. The latter level is acting as a strong resistance now.

1-3 WEEKS VIEW AUD has moved into a negative phase, could move below 0.6810 in the days ahead. Yesterday (17 Jun, spot at 0.6875), we highlighted the improvement in downward momentum and were of the view that “if AUD were to register a NY close below 0.6865, it would indicate the start of a move to 0.6810”. AUD subsequently dropped to 0.6849 before ending the day on a weak note at 0.6853 (-0.27%). The price action indicates that AUD has moved into a ‘negative phase’ and in view of the further increase in downward momentum, AUD could dip below the 0.6810 (next support is at 0.6770). Overall, AUD is expected to stay under pressure in the coming days unless it can move above the 0.6935 ‘key resistance’. On a shorter-term note, 0.6900 is already a strong level.

USD/JPY: 

24-HOUR VIEW USD is expected to trade sideways, likely between 108.35 and 108.75. Yesterday, we expected USD to “test 108.80 first before easing off”. However, USD only touched 108.72 before retreating. Upward pressure has dissipated and USD has likely moved into a consolidation phase. In other words, USD is expected to trade sideways, likely between 108.35 and 108.75.

1-3 WEEKS VIEW Diminished odds for further USD weakness. There is not much to add as USD spent another day going nowhere and ended the day unchanged at 108.55. Our narrative remains unchanged wherein USD is in a ‘negative phase’ but the odds for further weakness have diminished. However, only a break of the 109.05 ‘key resistance’ would indicate that USD has moved into a ‘sideway-trading phase’. To put it another way, there is still a slim chance that USD could move to the 107.50/105.70 support zone from here.

Source:
UOB Research/Market Commentary

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