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Jun 26 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on Jun 26 - 12:00 AM

EUR/USD: 

24-HOUR VIEW EUR is likely to consolidate and trade sideways, likely within a 1.1330/1.1395 range. While our view for EUR to “edge higher but 1.1450 is likely out of reach” is not entirely wrong, the sharp and rapid pull-back from a fresh 3-month high of 1.1412 was unexpected (EUR dropped to 1.1342 during NY hours). Upward pressure has dissipated and EUR has likely made a short-term top at 1.1415. However, it is too early to expect a reversal. EUR is more likely to consolidate and trade sideways for today, likely within a 1.1330/1.1395 range.

1-3 WEEKS VIEW Scope for rally to extend further but EUR is expected to face solid resistance at 1.1450. While EUR hit a fresh 3-month high of 1.1412, it was unable to hold on to its gain. Upward momentum has waned but it is too soon to change our view wherein the rally in EUR has scope to extend further towards 1.1450. That said, overbought shorter-term conditions suggest EUR could trade sideways to slightly lower for the next 1 to 2 days. In view, of the weakened momentum, we are adjusting the 1.1320 ‘key support’ to 1.1290.

GBP/USD: 

24-HOUR VIEW GBP is expected to trade sideways, likely between 1.2700 and 1.2770. GBP edged above the top our expected 1.2700/1.2770 consolidation range before staging a surprising sharp sell-off after touching 1.2784. While the rapid decline appears to be running ahead of itself, there is scope for GBP to test the strong 1.2650 support. At this stage, the prospect for sustained decline below this level is not high (next support is at 1.2620). Resistance is at 1.2720 followed by 1.2755. The 1.2784 high is not expected to come into the picture.

1-3 WEEKS VIEW A NY closing above 1.2763 would indicate start of a ‘positive phase’. While GBP hit a fresh 1-month high of 1.2784, it failed to hold on to its gains and dropped sharply to an overnight low of 1.2672. Our latest narrative from Monday (24 Jun, spot at 1.2745) was only a “NY closing above 1.2763” would indicate that GBP has moved into a ‘positive phase’. After yesterday’s price action, the prospect for such a scenario has diminished but only a break of the strong 1.2650 support would indicate that GBP has moved into a ‘sideway-trading phase’. Meanwhile, the outlook for GBP is still slightly positive but unless it can move and stay above 1.2763 soon, the current weakened momentum would deteriorate quickly.

AUD/USD: 

24-HOUR VIEW AUD is expected to trade sideways, likely between 0.6935 and 0.6980. Expectation for AUD to “move above 0.6980” did not materialize as it slipped after touching 0.6978. Upward momentum has eased and the current movement is viewed as part of a consolidation phase. In other words, AUD is expected to trade sideways, likely between 0.6935 and 0.6980.

1-3 WEEKS VIEW Only a NY close above 0.6980 would indicate AUD is ready to challenge 0.7025. Our latest narrative was from last Friday (21 Jun, spot at 0.6920) wherein AUD has “moved into a sideway-trading phase” but the improved underlying tone suggests it could “probe the top of the expected 0.6860/0.6980 range first”. After a few days, AUD ‘probed’ 0.6980 as it touched a high of 0.6979 during NY hours. While further AUD strength is not ruled out, upward momentum remains lackluster and AUD has to register a NY closing above 0.6980 in order to indicate that it is ready challenge the month-to-date high near 0.7025. At this stage, the prospect for such a scenario is not high even though it would increase as long as AUD does not move below 0.6900 in the coming days.

NZD/USD: 

24-HOUR VIEW NZD is expected to drift lower but a clear break of 0.6600 appears unlikely. We highlighted yesterday “NZD could test 0.6645 first” and added, “a sustained advance above this level is not expected”. NZD subsequently touched 0.6661 before easing off quickly. Upward pressure has dissipated and while it is too early to expect a significant pull-back, the intraday bias is tilted to the downside. From here, barring a move above 0.6665, NZD is expected to drift lower even though a clear break of 0.6600 appears unlikely (minor support at 0.6615).

1-3 WEEKS VIEW NZD has moved into a ‘positive phase’ with eyes on 0.6680. No change in view from yesterday, see reproduced update below.

We detected the pick-up in momentum last Thursday (20 Jun, spot at 0.6555) and held the view that “the recovery in NZD could test 0.6620”. Upward momentum has improved further as NZD touched 0.6626 yesterday (24 Jun) before closing on a firm note at 0.6619 (+0.44%). From here, NZD is deemed to have moved into a ‘positive phase’ with eyes on the month-to-date peak near 0.6680. On the downside, the ‘key support’ is at 0.6570 (was previously a ‘strong support’ at 0.6540).

USD/JPY: 

24-HOUR VIEW USD could continue to trade sideways, likely within a 106.90/107.50 range. Instead of trading sideways, USD dipped to 106.77 before rebounding quickly. Momentum indicators are mostly ‘neutral’ and we continue to expect USD to trade sideways for now, likely between 106.90 and 107.50.

1-3 WEEKS VIEW Focus is at 106.60 but prospect for a sustained decline below this level is not high. The current ‘negative phase’ that started more than 3 weeks ago (03 Jun, spot at 108.30) hit a fresh low of 106.77 yesterday (25 Jun). Our latest narrative was from last Friday (21 Jun, spot at 107.35) wherein a “break of 107.00 would shift focus to 106.60”. While we continue to hold the same view, the rapid bounce from 106.77 yesterday suggests the odds for a sustained decline below 106.60 is not high. On the upside, a break of the 107.85 ‘key resistance’ (level was at 108.00) would indicate that the ‘negative phase’ has run its course.

Source:
UOB Research/Market Commentary

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