EUR/USD: Neutral (since 05 Jun 18, 1.1700): EUR to stay supported, 1.1750 may not be strong enough to contain short-term strength.
EUR edged above Monday’s 1.1713 high and touched 1.1720 before skidding to close lower for the first time in 3 days (NY close of 1.1645, -0.48%). Despite the relatively large drop, the undertone remains positive and we continue to see chance for a test if not a break of 1.1750. That said, this has to happen within these 1 to 2 days as a prolonged consolidation would lead to a rapid loss in momentum. Conversely, a break of the ‘key support’ at 1.1605 would indicate that the immediate upward pressure has eased.
GBP/USD: Neutral (since 25 Jun, spot at 1.3265): GBP has moved into a consolidation range.
We highlighted on Monday (25 Jun, spot at 1.3265) that the outlook for GBP has turned neutral and that the current movement is viewed as the early stages of a consolidation phase. There is no change to the view and we continue to expect GBP to trade sideways for now, likely within a 1.3175/1.3360 range. An intraday dip below the 1.3175 support is not ruled out but we do not expect a break below last week 1.3102 low, at least not for the remaining of this week (there is a strong short-term support at 1.3140),
AUD/USD: Bearish (since 20 Jun 18, 0.7385): Bearish phase appears to be close to ending.
While the current outlook for AUD is still deemed as bearish, the lackluster price action over the past few days has resulted in a rapid loss in momentum. In order to revive the flagging momentum, AUD has to stage the next ‘down-leg’ soon or the current movement would appear to be more of a ‘basing phase’ instead of an interlude before further decline. To put it another way, the current bearish phase appears to be close to ending unless AUD can ‘punch’ through last week’s low of 0.7345. On the upside, a break of 0.7440 (‘stop-loss’ level previously at 0.7455) would confirm that the bearish phase has ended.
NZD/USD: Neutral (since 22 May 18, 0.6945): NZD under pressure but unclear if weakness can be sustained.
The relatively large decline of -0.66% in NZD yesterday came as a surprise. While there is no change to the current neutral outlook, the short-term pressure has shifted to the downside and last week’s low near 0.6825 appears to be vulnerable. That said, it is unclear at this stage whether any weakness in NZD can be sustained. Note that there are a couple of very strong supports below 0.6825, namely at the round-number level of 0.6800 and last year’s low of 0.6780. In view of the lackluster momentum, the prospect for a sustained move below these major support levels does not appear to be high. That said, NZD is expected to stay under pressure for now unless it can reclaim the ‘key resistance’ at 0.6920.
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD has likely moved into a broad consolidation phase. No change in view.
USD traded in a choppy manner yesterday as it dropped to a low of 109.35 before rebounding quickly. The price action offers no further clue and we continue to hold a neutral view and expect USD to trade sideways within a 109.10/110.65 consolidation range for now. Looking ahead, the downside appears to be more vulnerable and a clear break of 109.10 would suggest that USD is ready to test last month’s low near 108.10.