EUR/USD: EUR is still under pressure, next support at 1.1070.
We shifted to a negative stance yesterday (24 Apr, spot at 1.1225) and expected EUR to “stay on the defensive”. However, we held the view that “lackluster momentum suggests any weakness could be limited to the next support at 1.1140”. In that context, the decline in EUR yesterday that cracked the year-to-date low of 1.1174 was not exactly unexpected (EUR touched 1.1139 during late-NY hours). While the decline of -0.65% yesterday was rather substantial, there were several instances this year wherein EUR failed to extend lower despite registering a large one-day drop. Not only it did not extend lower, EUR subsequently rebounded strongly (see the circles in the chart below which show the 4 largest one-day drop this year). That said, we are not anticipating a rebound for now. The improved downward pressure suggests EUR could weaken further even though it is unclear at this stage if the next major support at 1.1070 would come into the picture. On the upside, the ‘key resistance’ has moved lower to 1.1240 from yesterday’s level of 1.1285. EUR is expected to stay under pressure until it can break the ‘key resistance’
GBP/USD: GBP remains under pressure but Feb’s low of 1.2773 may be out of reach.
We highlighted yesterday (24 Apr, spot at 1.2940) “GBP is expected to move to 1.2900 followed by 1.2870”. GBP subsequently dropped to 1.2887 during late NY hours. The vastly improved downward momentum suggests that a break of 1.2870 would not be surprising. However, the next major support at 1.2773 (low in Feb) may be out of reach this time round. All in, GBP is expected to remain under pressure until it can move above the 1.2995 ‘key resistance’ (level was at 1.3020 yesterday).
AUD/USD: A NY close below 0.7005 would open up the way for AUD to move to 0.6950. No change in view from yesterday, see reproduced update below. From here, a NY closing below 0.7005 would open up the way for AUD to move to 0.6950. ‘Key resistance’ has moved lower to 0.7100 from 0.7140.
We highlighted on Monday (22 Apr, spot at 0.7145) that “last week’s 0.7206 peak is a short-term top”. We added, “AUD is expected to stay under mild downward pressure” and held the view that a sustained drop below 0.7100 is unlikely. However, AUD dropped sharply to a low of 0.7082 yesterday and the just released Australia inflation data sent it reeling further (low of 0.7045 at the time of writing). The price action has resulted in a rapid increase in downward pressure and from here; a move to last month’s low near 0.7005 seems likely. 0.7000/05 is a rather critical support and a break of this level would indicate AUD could move even lower in the weeks ahead (next nearest support is at 0.6950). For the next few days, we expect AUD to stay below the 0.7140 ‘key resistance’.
NZD/USD: NZD is still weak but unclear if can extend weakness to next support at 0.6485.
We indicated yesterday (24 Apr, spot at 0.6655) that the “prospect for further weakness to the year-to-date low 0.6591 has increased”. NZD subsequently dropped to a low of 0.6582 before ending the day on a weak note (-0.96%). From the perspective of multi-week, the next significant support is about another 100 pips lower at 0.6485 (rising trend-line on the weekly chart, not visible in the chart below). However, the current decline is deep in oversold territory now and it is unclear at this stage whether NZD could extend lower to 0.6485. Note that the current negative phase (that started in late March) is in its fourth week now. Overall, NZD is still weak and only a move back above the 0.6680 ‘key resistance’ (level was at 0.6705 yesterday) would indicate that the negative phase has ended.
USD/JPY: USD is expected to trade with a positive bias but 112.60 could be out of reach.
We have held the same view since last Monday (15 Apr, spot at 112.00) wherein USD is “expected to trade with a positive bias but 112.60 could be out of reach”. After trading in a quiet manner for several days, USD finally ‘broke’ higher and hit an overnight high of 112.39. However, the swift pull-back from the high suggests that USD may not be ready to challenge 112.60 just yet. That said, the current positive phase is deemed as intact until the ‘key support’ at 111.60 is taken out (level previously at 111.40). Looking ahead, a break of 112.60 would indicate that USD could appreciate further to 113.00 (and likely beyond).