EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR is ready to tackle the next resistance at 1.1745.
After touching a high of 1.1733 on Tuesday (28 Aug), EUR has not been able to make much headway on the upside. While upward pressure is starting to wane, there is still scope for EUR to make another run to test the major 1.1745 resistance. That said, this has to happen within these 1 to 2 days as a more prolonged consolidation at these levels would greatly increase the risk of a short-term top. Conversely, a break of the 1.1590 ‘key support’ would indicate that a EUR has made a short-term at 1.1733 on Tuesday.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Room for GBP strength to 1.3150. No change in view.
We noted yesterday that further out, “it appears the current consolidation would be resolved by a break above 1.2960 but this is unlikely to happen so soon”. The break of 1.2960 happened way sooner than anticipated as GBP rocketed to a high of 1.3033 (after Barnier’s comments). Despite the strong surge, we are not ready to adopt a bullish stance just yet. That said, after the outsized rally, the pressure is clearly on the upside and we see room for further GBP strength to 1.3150. At this stage, the prospect for a clear break above this level is not high but it would continue to improve as long as GBP can hold above the ‘key support’ at 1.2930.
AUD/USD: Neutral (since 21 Aug 18, spot at 0.7335): Year-to-date low of 0.7203 appears to be vulnerable.
AUD dipped below the bottom of our expected 0.7250/0.7420 consolidation range yesterday (overnight low of 0.7249) before ending the day on a weak note (NY close of 0.7264, -0.62%). While the immediate pressure is on the downside and further AUD weakness is likely from here, it is unclear at this stage whether any decline is sustainable. That said, unless AUD can reclaim 0.7320 within the next couple of days, the year-to-date low of 0.7203 appears to be vulnerable. The next support at 0.7145/60 is a very major support zone, being the low in 2017 as well as the 10-year rising trend-line support. At this stage, a move to this major zone support would not exactly be surprising but we expect such strong levels to offer solid support.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): NZD has moved back into a consolidation phase.
There is not much to add to yesterday’s (30 Aug, spot at 0.6685) update. As highlighted, the outlook remains neutral and NZD is expected to trade sideways from here, likely within a broad 0.6620/0.6730 range (there is another strong support at 0.6600). At this stage, the year-to-date low of 0.6545 appears to be ‘safe’, at least for the next week or so.
USD/JPY: Neutral (since 23 Jul 18, 111.20): USD has moved back into a consolidation phase.
One day after making a 4-week high of 111.82 on Wednesday (29 Aug), USD surrendered all its gains and more as it plummeted to end the day on a weak note (NY close of 110.93, -0.61%). The weak daily closing is enough to suggest that the recent upward pressure has eased (even though the overnight low of 110.93 was above the 110.90 ‘key support’). From here, the major 112.14 resistance is likely to remain unthreatened as USD has likely moved back into a consolidation phase. To put it another way, there is no change to the neutral outlook but USD is expected to trade sideways from here, likely between 110.35 and 111.80.