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Thomson Reuters
Apr 17 - 01:24 AM
First appeared on eFXplus on Apr 17 - 12:00 AM

EUR/USD: A NY close above 1.1330 would suggest EUR is ready to tackle 1.1400.

EUR slipped to a low of 1.1278 and closed lower by -0.23% (NY close of 1.1280). The low of 1.1278 is ‘comfortably’ above our 1.1240 ‘key support’. As indicated over the past couple of days, only a break of 1.1240 would suggest the current upward pressure in EUR has eased. On the upside, if EUR could close above 1.1330 in NY, it would be a good indication that EUR is ready to tackle the next major resistance at 1.1400. That said, EUR has to start ‘cracking’ and move above 1.1330 soon (say within these few days) or a prolonged consolidation around current levels would lead to a rapid loss in momentum.

GBP/USD: GBP is expected to continue to trade sideways.

After trading in a quiet manner for several days, GBP slipped and closed lower by -0.39% (NY close of 1.3048). While downward pressure has ticked up, it is too soon to expect a sustained decline. From the perspective of several weeks, we continue to view the current price action in GBP as part of a sideway-trading phase (we have held the same view for about 2 weeks now). That said, the slight uptick in downward pressure suggests GBP could drift lower and probe the bottom of the expected 1.2950/1.3200 range within the next few days. At this stage, the prospect for a sustained drop below 1.2950 is not high.

AUD/USD: AUD strength could extend to 0.7210.

AUD dipped to 0.7140 yesterday before rebounding quickly to end the day little changed at 0.7176 (+0.05%). The underlying tone remains firm and we continue to hold the view that AUD could extend higher to 0.7210. As highlighted over the past few days, 0.7210 is a rather critical resistance and a clear break of this level would suggest AUD is ready to move even higher in the coming weeks. On the downside, only a break of the 0.7115 ‘key support’ (no change in level) would suggest that a short-term top is in place.

NZD/USD: Negative phase has been ‘revived’; NZD is expected to move below 0.6660.

We highlighted on Monday (15 Apr, spot at 0.6770) that “while our 0.6785 ‘key resistance’ is still intact, the price action suggests that the risk of a short-term bottom has increased”. We added, “meanwhile, NZD could attempt to move towards 0.6700 but the odds for such a move have diminished considerably”. The ‘key resistance’ remains intact as NZD nose-dived this morning (after the release of weaker than expected NZ inflation data) and sliced through 0.6700 (low of 0.6668 at the time of writing). The low of 0.6668 is not far above a relatively strong 0.6660 support but below 0.6660, the next significant support level is about another 70 pips lower at 0.6591 (the year-todate low in early-Jan when USD/JPY was hit by a ‘flash crash’). All in, the price action this morning suggests that the ‘negative phase’ that started 3 weeks ago (27 Mar, spot at 0.6830, after RBNZ hint of a possible rate cut) has been ‘revived’. Oversold short-term indicators suggest NZD could consolidate for a few days first but as long as the 0.6785 ‘key resistance’ remains intact, NZD is expected to move below 0.6660. Further weakness to 0.6591 is not ruled out but at this stage, the odds are not that high.

USD/JPY:  USD is expected to trade with a positive bias but 112.60 could be out of reach.

USD had another quiet day and traded within a tight range before ending the day largely unchanged (NY close of 111.99, -0.03%). For now, we continue to hold the same as on Monday (15 Apr) wherein USD “is expected to trade with a positive bias but 112.60 could be out of reach”. All in, we expect USD to trade with a positive bias and only a break of the 111.40 ‘key support’ (level was at 111.20 previously) would suggest that the current ‘positive phase’ in USD has ended.

UOB Research/Market Commentary


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