EUR/USD: Neutral (since 05 Jun 18, 1.1700): Downward pressure has eased, EUR to trade sideways to slightly higher.
We have held the same view since last Thursday (28 Jun, spot at 1.1560) wherein a break of the major 1.1505/10 support would not be surprising, the “prospect for a sustained decline is not high”. EUR subsequently hit a low 1.1525 during NY hours on Thursday before staging a surprisingly strong and sharp rally that hit a high of 1.1690 on Friday. The breach of the ‘key resistance’ at 1.1670 indicates that the recent downward pressure has eased. That said, there is no change to the current neutral outlook for EUR but it is expected to trade sideways to slightly higher from here, likely within a 1.1570/1.1750 range.
GBP/USD: Neutral (since 25 Jun, spot at 1.3265): GBP has moved into a consolidation phase and is expected to trade sideways.
We have held the same view since last Thursday (28 Jun, spot at 1.3120) wherein we expect the oversold conditions to ‘limit’ GBP weakness to 1.3040. While GBP subsequently recovered after touching a low of 1.3050, the strong and outsized rally last Friday came as a surprise (closed at 1.3206, +0.97%). The breach of the ‘key resistance’ at 1.3190 (high of 1.3214 on Friday) indicates that the recent downward pressure has eased. That said, the outlook remains neutral for now and GBP has likely moved into a consolidation phase and is expected to trade sideways from here, likely between 1.3100 and 1.3280.
AUD/USD: Bearish (since 20 Jun 18, 0.7385): Increasing risk of a short-term bottom.
We highlighted last Friday “downward momentum has not improved all that much and the next support at 0.7300 may be a tough level to crack”. However, the subsequent sharp rebound in AUD that hit a high of 0.7410 was not expected. From here, a break of the ‘stop-loss’ at 0.7420 would not be surprising and would indicate that last week’s 0.7323 low is a short-term bottom. This scenario seems likely unless AUD can move and stay below 0.7360 within these few days.
NZD/USD: Bearish (since 28 Jun 18, 0.6785): Decline approaching oversold but could extend to 0.6720. No change in view
We just turned bearish on NZD yesterday (28 Jun, spot at 0.6785) and there is no change to the view. As highlighted, while oversold, the current decline could extend further to 0.6720 (next support is at 0.6700). We will maintain a bearish NZD view until the ‘stop-loss’ at 0.6830 is taken out (level previously at 0.6860).
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD to stay supported but any strength is unlikely to be sustained.
USD rose to hit a high of 110.93 last Friday and the undertone has improved further. While the immediate bias has shifted to the upside, we are not convinced that any USD strength can be sustained. Overall, we expect USD to stay underpinned in the next few days with 110.10 acting as a ‘key support’. On the upside, 111.00 is a strong resistance ahead of the May’s peak at 111.40.