EUR/USD: EUR to stay on the defensive, any weakness could be limited.
The relatively sharp and rapid decline in EUR yesterday (23 Apr) that moved below the bottom of our expected 1.1200/1.1300 sidewaytrading range was not expected (overnight low of 1.1190). Downward pressure has ticked up and the near-term risk is tilted to the downside. For the next one week, EUR could move below the year-to-date low of 1.1174. That said, lackluster momentum suggests any weakness could be limited to the next support at 1.1140. To put it another way, EUR is expected to be stay on the defensive from here. Only a move above 1.1285 would indicate that the current mild downward pressure has eased.
GBP/USD: GBP is expected to move to 1.2900, followed by 1.2870.
We held the view that GBP is expected to “trade sideways” since early last week but noted, “the pick-up in downward pressure suggests GBP could probe the 1.2950 level” (1.2950 was the bottom of our expected sideway trading range). We highlighted yesterday that “looking forward, a break 1.2950 would indicate that a move towards 1.2900 (and possibly below this level) has started”. From that perspective, the decline to a low of 1.2928 yesterday (23 Apr) was not exactly unexpected. Downward pressure has improved further and from here, GBP is expected to move to 1.2900 followed by 1.2870. Further down, the next support is at 1.2830. On the upside, only a move above the 1.3020 ‘key resistance’ would indicate that a short-term bottom is in place.
AUD/USD: AUD could move to last month’s low near 0.7005.
We highlighted on Monday (22 Apr, spot at 0.7145) that “last week’s 0.7206 peak is a short-term top”. We added, “AUD is expected to stay under mild downward pressure” and held the view that a sustained drop below 0.7100 is unlikely. However, AUD dropped sharply to a low of 0.7082 yesterday and the just released Australia inflation data sent it reeling further (low of 0.7045 at the time of writing). The price action has resulted in a rapid increase in downward pressure and from here; a move to last month’s low near 0.7005 seems likely. 0.7000/05 is a rather critical support and a break of this level would indicate AUD could move even lower in the weeks ahead (next nearest support is at 0.6950). For the next few days, we expect AUD to stay below the 0.7140 ‘key resistance’.
NZD/USD: Prospect for further weakness to 0.6591 has increased.
The negative phase in NZD that started late last month remains intact as it dropped sharply to 0.6630 yesterday (23 Apr). The price action was not unexpected, as we have held the same view since last Thursday (18 Apr) wherein NZD is “expected to move below 0.6660”. We indicated previously “further weakness to 0.6591 is not ruled out but at this stage, the odds are not that high”. However, after yesterday’s price action, the odds for a move to the year-to-date low of 0.6591 have clearly increased. On the upside, the ‘key resistance’ has moved lower to 0.6705 from the prior level of 0.6750.
USD/JPY: USD is expected to trade with a positive bias but 112.60 could be out of reach.
USD closed largely unchanged in NY yesterday at 111.86 (-0.06%). The quiet price action offers no fresh clues and we continue to hold the same last Monday (15 Apr) wherein USD is “expected to trade with a positive bias”. However, as highlighted previously, the 112.60 resistance is likely out of reach. On the downside, only a break of 111.40 (no change in ‘key support’ level) would indicate that the current mild upward pressure has eased.