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Jul 17 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on Jul 17 - 12:00 AM

EUR/USD: 

24-HOUR VIEW Weakness in EUR is expected to extend lower but major 1.1180 support is unlikely to yield so easily. Expectation for EUR to trade sideways was incorrect as it staged a surprisingly deep decline but the down-move was checked by the strong 1.1200 support (overnight low of 1.1200). Downward momentum has improved and from here, barring a move above 1.1245 (minor resistance is at 1.1225), the weakness in EUR is expected to extend lower but the major 1.1180 support is unlikely to yield so easily (next support is at 1.1155).

1-3 WEEKS VIEW EUR is expected to trade with a ‘downside bias’ but is unlikely to challenge 1.1100. After trading in a relatively subdued manner for a few days, EUR staged a surprisingly sudden and sharp decline and tested the bottom of our expected 1.1200/1.1310 sideway trading range (first indicated last Thursday,11 Jul, spot at 1.1255). From here, a move below 1.1200 and the mid-June low near 1.1180 would not be surprising. However, downward momentum is not as strong as we prefer and EUR is unlikely to ‘accelerate’ lower. Overall, EUR is expected to trade with a ‘downside bias’ for now but is unlikely to challenge the year-to-date low near 1.1100 (there is another support at 1.1155). On the upside, only a move above the strong 1.1260 resistance would indicate that the current downward pressure has eased.

GBP/USD: 

24-HOUR VIEW GBP could weaken further to 1.2365. While we expected GBP to weaken yesterday, the manner by which it crashed through several strong support levels with ease came as a surprise (overnight low of 1.2396). The rapid drop appears to be running ahead of itself but as there is no sign of stabilization just yet, GBP could weaken further to 1.2365. Only a move back above 1.2460 would indicate that the weakness in GBP has stabilized (minor resistance is at 1.2440).

1-3 WEEKS VIEW GBP is in a ‘negative phase’, could trade towards 1.2340. We indicated yesterday (16 Jul, spot at 1.2515) that “a dip below 1.2470 is not ruled but GBP has to register a NY closing below 1.2440 in order to indicate that it is ready to move below the year-to-date low near 1.2410”. However, the rapid pace of how the price action evolved was unexpected as GBP plunged to a 27-month low of 1.2396 (before closing -0.89% lower at 1.2405, the largest 1-day decline in almost 4 months). The sharp decline indicates that the ‘sideway-trading phase’ that started last Friday (12 Jul, spot at 1.2525) has ended earlier than expected. From here, GBP is deemed to have move into a ‘negative phase’ and could move to 1.2340. On the upside, only a break of the 1.2490 ‘key resistance’ would indicate that the current downward pressure has eased. On a shorter-term note, 1.2460 is already a strong resistance level.

AUD/USD: 

24-HOUR VIEW AUD is expected to trade sideways, likely between 0.6995 and 0.7040. Despite overall positive indications, AUD was unable to crack the strong 0.7050 resistance (high of 0.7045). Upward pressure has fizzled out with the rapid pull-back from the high and 0.7050 is likely to remain unchallenged for today. The current movement is viewed as part of a consolidation phase and AUD is expected to trade sideways, likely between 0.6995 and 0.7040.

1-3 WEEKS VIEW Sustained AUD strength is only likely if it can move and stay above the major 0.7050/70 resistance zone. No change in view from yesterday, see reproduced update below.

AUD continues with its advance and registered a 4-day gain of 1.62% yesterday (15 Jul), the largest since January. While upward momentum has improved, we have doubts about the sustainability of the current advance. As highlighted yesterday, AUD has to break above the major 0.7050/70 resistance zone in order to indicate that it is ready to move higher in a sustained manner. 0.7050 was near the high registered earlier this month (and in early May) while 0.7070 is the minor peak in late April as well as a declining trend-line resistance (not visible in the chart below). In other words, the levels between 0.7050 and 0.7070 are solid resistance levels and at this stage, the risk for a clear break of this zone is not high. That said, only a move below 0.6980 (level was at 0.6960 yesterday) would indicate that the upside risk has diminished. Looking ahead, if AUD were to move and stay above 0.7070, it would suggest last month’s 0.6832 low could be a significant bottom.

NZD/USD:

24-HOUR VIEW NZD is expected to trade sideways, likely within a 0.6685/0.6725 range. NZD traded between 0.6696 and 0.6738 yesterday, relatively close to our expected range of 0.6700/0.6740. That said, the weak daily closing of 0.6698 suggests upward pressure has eased. From here, NZD is expected to trade sideways to slightly lower, likely within a 0.6685/0.6725 range.

1-3 WEEKS VIEW Sustained NZD strength only if NZD were to close above 0.6740 in NY. No change in view from yesterday, see reproduced update below.

NZD extended its advance and easily moved above the 0.6710 resistance (high of 0.6725). As indicated yesterday, NZD has to register a NY close above 0.6740 in order to indicate it is ready for a sustained advance. The prospect for such a scenario is not high for now but it would continue to rise if NZD can continue to hold above 0.6670 (level was at 0.6640 yesterday) within these few days.

USD/JPY: 

24-HOUR VIEW USD could test 108.50 but a move beyond 108.75 is not expected. Instead of trading sideways, USD rose to an overnight high of 108.37. Despite the relatively strong advance, upward momentum has improved by much. That said, USD could test 108.50 but a move beyond 108.75 is not expected. Support is at 108.10 but the stronger level is at 107.90.

1-3 WEEKS VIEW USD is expected to trade sideways. There is not much to add as USD traded in an ‘erratic’ manner as it recouped most of last Friday’s decline (closed at 108.22, +0.29%). For now, we continue to hold the same view from last Thursday (11 Jul, spot at 108.30) wherein USD is expected to trade sideways within a 107.50/108.95 range. Looking forward, the risk of a break of the top of the range first appears to be higher. However, USD has to close above 109.00 in order to indicate that it is ready to challenge 109.60. Meanwhile, the 107.50/108.95 range could remain intact, at least for a few more days.

Source:
UOB Research/Market Commentary

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