EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR is ready to tackle the next resistance at 1.1745. No change in view.
There is not much to add to yesterday’s update (28 Aug, spot at 1.1680) as EUR extended its gain to an overnight high of 1.1733. As highlighted, there is still scope for further EUR strength and the focus is at 1.1745. While a break of this level would not be surprising, we continue to see low odds for a sustained move above the next resistance at 1.1790. That said, overbought shorter-term indicators could lead to 1 to 2 days of consolidation first but as long as the ‘key support’ at 1.1590 is intact (no change in level), it is too early to expect a short-term top.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Room for GBP strength to 1.3150.
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): AUD is expected to trade sideways.
AUD dipped to a low of 0.7276 before rebounding quickly. Most indicators are showing mixed signals after the recent choppy price actions and we continue to hold a neutral stance from here. In other words, we still expect AUD to trade sideways, likely within a 0.7250/0.7420 range.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): NZD has moved back into a consolidation phase.
NZD just dropped sharply at the time of writing and has put paid to our recent expectation for a test of 0.6760. There is no change to the neutral outlook but NZD has likely moved back onto a consolidation phase and is expected to trade sideways from here, likely within a broad 0.6620/0.6730 range.
USD/JPY: Neutral (since 23 Jul 18, 111.20): Probability for a move above 112.14 has improved.
We have held the same view since last Friday (24 Aug, spot at 111.35) wherein the rebound in USD “has scope to extend higher but 112.14 is likely out of reach”. After trading sideways for several days, USD finally moved higher yesterday and hit a high of 111.82. The probability for a move above 112.14 has clearly improved but patchy momentum suggests that a sustained move above this level is unlikely. The next resistance above this level is at 112.65. All in, we continue to expect USD to stay underpinned until the ‘key support’ at 110.90 is taken out (level was previously at 110.50).