EUR/USD: Shift from bearish to NEUTRAL: EUR has moved into a consolidation/correction phase.
In last Friday’s update (11 May, spot at 1.1920), we highlighted “the diminished odds for further EUR weakness” and the subsequent break of 1.1960 confirms that the bearish phase that started earlier this month has ended. The outlook for EUR is deemed as neutral now and last week’s 1.1821 low is viewed as a short-term bottom. To look at it another way, the decline that started in mid-April from a high of 1.2413 has likely found a base at 1.1821 and from here, we believe EUR has moved into a consolidation/correction phase. That said, the immediate bias is tilted to the upside even though any advance is viewed as part of a 1.1850/1.2050 correction/consolidation phase and not the start of a bullish reversal.
AUD/USD: Neutral (since 11 May 18, 0.7525): AUD has moved into a correction/consolidation phase.
We just shifted to a neutral stance last Friday (11 May, 0.7525) and there is no change to the view. As indicated, AUD has likely found a short-term base at 0.7413 last Tuesday (09 May). The current movement is viewed as the early stages of a correction/consolidation phase. Near-term, the immediate bias is tilted to the upside but at this stage, any advance in AUD is viewed as part of a 0.7440/0.7600 consolidation range and not the start of a bullish reversal.
NZD/USD: Bearish (since 02 May 18, 0.7005): Diminished odds for further NZD weakness.
NZD traded within an ‘inside day’ last Friday and registered a relatively narrow range of 0.6955/0.6987. The recent strong downward momentum has eased considerably and the while the outlook for NZD is still deemed as bearish, the odds for further weakness below the major 0.6900 support have diminished. However, only a break of 0.7005 (‘stop-loss’ level unchanged) would indicate that the current bearish phase has ended.
USD/JPY: Neutral (since 21 Feb 18, 107.35): Pressure shifted to the upside, a test of 110.45/50 would not surprise. No change in view.
USD tried but failed to move convincingly above 110.00 (high of 110.01 yesterday). Despite the pull-back from the high, there is still chance for USD to test the strong 110.45/50 resistance (before a more sustained pull-back can be expected). Only a break of 109.00 would indicate that the current mild upward pressure has eased.