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Thomson Reuters
May 07 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on May 07 - 12:00 AM

EUR/USD: 

24-HOUR VIEW: Underlying tone appears to be firm, room for EUR to test 1.1225. We highlighted yesterday that “while there is not much improvement in momentum, the short-term EUR strength has scope to extend to 1.1225”. However, EUR traded in relatively subdued manner and only touched 1.1209. The underlying tone still appears to be on the firm side and we continue to see room for EUR to test 1.1225. That said, a sustained rise above this level is not expected (next resistance is at 1.1265). Support is at 1.1175 followed by 1.1155.

1-3 WEEKS VIEW: EUR is expected to trade sideways. There is not much to add as EUR traded in a relatively subdued manner and ended the day largely unchanged at 1.1197 (-0.02%). The price action is in line with our current view (since last Thursday, 02 May, spot at 1.1200) wherein EUR is “expected to trade sideways”, likely between the two strong levels of 1.1110 and 1.1265. Momentum indicators are still mostly neutral and at this stage, there is no early indication on which level is more ‘vulnerable’.

GBP/USD: 

24-HOUR VIEW: GBP is expected to trade sideways to slightly lower, likely within a 1.3065/1.3135 range. Instead of “extending its gains”, GBP eased off quickly after briefly touching a high of 1.3190. The swift and sharp pull-back amidst overbought condition and waning momentum suggests that 1.3190 could a short-term top. The current movement is viewed as an ongoing consolidation phase. For today, GBP is expected to trade sideways to slightly lower, likely within a 1.3065/1.3135 range.

1-3 WEEKS VIEW: Odds for a break of the April’s peak of 1.3196 have improved. No change in view from yesterday, see reproduced update below. We have held the same view since last Thursday (02 May, spot at 1.3050) wherein the “rebound in GBP has scope to extend to 1.3130”. We also indicated, “at this stage, the prospect for a move to the April’s peak of 1.3196 is not high”. However, after Friday’s strong surge (GBP closed higher by a whopping +1.10% at 1.3176), the odds for a break of 1.3196 have improved considerably. However, there are a couple of strong resistance levels above 1.3196 and for now; it is premature to expect a move to the year-to-date high of 1.3380. Overall, the current ‘positive phase’ in GBP is expected to remain intact as long as the 1.3035 is not taken out (‘key support’ was previously at 1.2975).

AUD/USD:

24-HOUR VIEW: AUD is expected to trade sideways, likely within a 0.6970/0.7015 range. We held the view that “a dip below 0.6950 would not be surprising” yesterday. However, AUD recovered after touching 0.6960 and subsequently traded sideways. Momentum indicators are neutral now and AUD is likely to continue to trade sideways. Expected range for today, 0.6970/0.7015.

1-3 WEEKS VIEW Break of 0.6950 would shift focus to 0.6910. No change in view from yesterday, see reproduced update below. The negative phase in AUD that started more than a week ago (see update on 25 Apr, spot at 0.7015) is still clearly intact. Last Friday, we indicated that in view of lackluster momentum AUD could “drift” lower to lower to 0.6950. While AUD ended last Friday on a firm note (NY close of 0.7025, +0.35%), the sudden lurch lower this morning suggests that a break of 0.6950 would not be surprising. A break of this level would shift the focus to 0.6910. On the upside, only a break the 0.7060 ‘key resistance’ (no change in level for now) would indicate that the current negative phase has ended.

NZD/USD: 

24-HOUR VIEW: NZD is expected to trade sideways, likely within a 0.6590/0.6625 range. Expectation for NZD to “challenge last week’s 0.6580 low” did not materialize as it traded in a quiet manner between 0.6600 and 0.6630. While further sideway trading seems likely from here, the soft underlying tone suggests a lower trading range of 0.6590/0.6625.

1-3 WEEKS VIEW: A NY close below 0.6595 would suggest a move to 0.6550 has started. While NZD gapped lower upon opening yesterday, it subsequently traded in a relatively quiet manner between 0.6600 and 0.6630 before ending the day lower by -0.58% (NY close of 0.6606). We have held the same view since last Monday (29 Apr, spot at 0.6660) that NZD “has likely moved into a consolidation phase” but the underlying tone has since weakened and this has increased the risk of a resumption of the recent NZD weakness. However, only a NY close below 0.6595 would suggest that a move to 0.6550 has started. Overall, NZD is expected to be under pressure unless it can move and stay above the 0.6660 ‘key resistance’.

USD/JPY:

24-HOUR VIEW: USD is expected to traded sideways, likely between 110.40 and 111.10. We indicated yesterday “the strong gap down in USD this morning appears to be running too fast, too soon” and added, USD is more likely to consolidate and trade sideways within a 110.30/111.00 range. USD subsequently dipped to 110.27 before rebounding to an overnight high of 110.95. Downward pressure has eased with the recovery and the current movement is viewed as part of a consolidation phase. In other words, USD is expected to trade sideways, likely between 110.40 and 111.10.

1-3 WEEKS VIEW: Focus is at the March low of 109.70. No change in view from yesterday, see reproduced update below. The week-long consolidation phase ended with a bang as USD nose-dived early this morning and cracked a couple of solid supports with ease. USD is deemed to have moved into a negative phase and the focus is at the March low of 109.70. This is a rather solid support and may not yield as easily. All in, USD is expected to trade under pressure in the coming days as long as the 111.45 ‘key resistance’ is intact.

Source:
UOB Research/Market Commentary

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