EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR is caught in a consolidation range for now.
EUR traded in a relatively narrow range between 1.1309 and 1.1361 yesterday before ending the day unchanged at 1.1344. The price action offers no further clues and we continue to hold the view that EUR is “caught in a consolidation range for now”. In other words, we expect EUR to trade sideways from here, likely within a broad 1.1265/1.1440 range.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP to trade sideways to lower in the coming days. No change in view.
While we have been expecting GBP to “move below the year-to-date low of 1.2662” since last Wednesday (28 Nov, spot at 1.2745), we underestimated the short-term volatility. GBP took out our 1.2825 ‘key resistance’ first (high of 1.2840) before plunging by close to 200 pips to a low of 1.2659, all within several hours. Despite the wild swings, the underlying tone remains soft even though any weakness could be ‘fleeting’. All in, we expect GBP to trade sideways to lower in the coming days, likely within a broad 1.2600/1.2850 range.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Short-term top in place, pull-back has scope to extend lower to 0.7200, possibly 0.7160.
As highlighted yesterday (05 Dec, spot at 0.7310), a break of the 0.7280 ‘key support’ would indicate that the recent positive phase in AUD has ended. From here, the 0.7394 high seen on Monday (03 Dec) is deemed as a short-term top and the current price action is viewed as the early stages of a correction/consolidation phase. That said, the near-term bias is on the downside and the current pull-back has scope to extend lower to 0.7200 (with lower probability for extension to 0.7160). On the upside, only a move 0.7340 would indicate that the current downward pressure has eased.
NZD/USD: Bullish (since 04 Dec 18, 0.6925): Risk of a short-term top has increased.
While our ‘stop-loss’ for our bullish view at 0.6860 is still intact, the large daily loss of -0.43% (0.6898) yesterday does not bode well for our outlook. The risk of the Tuesday’s (04 Dec) peak of 0.6969 as a short-term top has increased and a break of 0.6860 would indicate that NZD has moved into a correction/consolidation phase. In order to revive the current the rapidly waning momentum, NZD has to move and stay above 0.6930 within these 1 to 2 days or a break of the ‘stop-loss’ would not exactly be surprising.
USD/JPY: Neutral (since 09 Oct 18, 113.10): Scope for USD to test the November’s low of 112.29.
USD recouped some of Tuesday’s (04 Dec) large drop as it closed higher at 113.19 (+0.37%). Despite the rebound, we continue to see “scope for USD to test the November’s low of 112.29”. However, as highlighted yesterday (05 Dec, spot at 112.80), 112.29 sits near a rising trend-line support and a clear break of this level seems unlikely. On the upside, only a move back above 113.60 would indicate that the current downward pressure has eased.