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Jul 01 - 09:48 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on Jul 01 - 08:29 AM

EUR/USD: 

24-HOUR VIEW EUR could continue to trade sideways but consolidation appears to be close to completion. EUR traded sideways between 1.1349 and 1.1393 last Friday, relatively close to our expected range of 1.1340/1.1390. While the quiet price action offers no fresh clues, the current prolonged consolidation could be close to completion but only a clear break out of the 1.1340/1.1400 range would indicate the start of a more sustained directional move. In the meanwhile, EUR could continue to trade between the two strong levels of 1.1340 and 1.1400.

1-3 WEEKS VIEW Scope for rally to extend further but EUR is expected to face solid resistance at 1.1450. There is not much to add as EUR consolidated and closed unchanged in NY last Friday (1.1368, 0.00%). Upward momentum has waned further and time is running out for view wherein the rally from 24 Jun (spot at 1.1375) has “scope to extend further” but any up-move is “expected to face solid resistance at 1.1450”. In order to rejuvenate the current flagging momentum, EUR has to move and stay above 1.1400 soon or a break of the 1.1290 ‘key support’ (no change in level) would indicate that EUR has lapsed into a ‘sideway-trading phase’.

GBP/USD: 

24-HOUR VIEW GBP could retest last Friday’s peak of 1.2735. Expectation for GBP to “dip below 1.2650” was incorrect as it rebounded strongly from 1.2665 and touched 1.2735 during NY hours last Friday. Despite the pull-back from the high, the underlying tone has improved and from here, a retest of the 1.2735 high would not be surprising. That said, last week’s peak at 1.2784 is unlikely to come into the picture. Support is at 1.2675 followed by the still rather strong level of 1.2650.

1-3 WEEKS VIEW A NY closing above 1.2763 would indicate start of a ‘positive phase’. We highlighted last Friday (28 Jun, spot at 1.2675) that “upward momentum has been dented” but added, “until there is a break of the strong support at 1.2650, the outlook for GBP still appears to be slightly positive”. Despite our reservation, 1.2650 continues to hold as GBP rebounded from 1.2665. Despite the rebound, upward momentum has not improved by that much and we are back to the scenario (as from 24 June, spot at 1.2745) wherein only “a NY closing above 1.2763 would indicate start of a ‘positive phase’”. We will continue to hold the same view for now but GBP has to get ‘cracking’ soon or the current lackluster upward momentum would deteriorate quickly

AUD/USD: 

24-HOUR VIEW AUD is expected to trade sideways between 0.7000 and 0.7040. Last Friday, our view for AUD was for it to “drift higher and test the strong 0.7025 resistance”. AUD subsequently touched a high of 0.7025 before closing right at the high in NY. AUD opened strongly this morning and extended its gain 0.7039. The advance appears to be ‘overextended’ and further sustained gains appear unlikely from here. That said, it is too early to expect a significant pull-back. AUD is more likely to consolidate its gains and trade sideways at these higher levels, expected to be within a 0.7000/0.7040 range.

1-3 WEEKS VIEW Only a NY closing above 0.7025 would indicate the start of a ‘positive phase’ in AUD. We expected AUD to strengthen further since last Thursday (27 Jun, spot at 0.6985) and indicated that AUD is expected to “trade with an ‘upside bias’ and move to 0.7025”. We added last Friday (28 Jun, spot at 0.7005) that “if AUD were to close above 0.7025, it would indicate the start of a ‘positive phase’ towards 0.7065”. AUD subsequently touched 0.7025 during NY hours on Friday before extending its gains upon opening this morning. In other words, our view from here is “only a NY closing above 0.7025 would indicate the start of a ‘positive phase’ in AUD”. The prospect for AUD to close above 0.7025 is not very high for now but it would remain intact until the strong support at 0.6960 is taken out (level was at 0.6930 previously).

NZD/USD: 

24-HOUR VIEW NZD is likely to consolidate its gains and trade sideways, likely within a 0.6700/0.6740 range. We expected the strength in NZD to “extend further” but were of the view “any up-move is expected to struggle to move above 0.6720”. NZD subsequently touched 0.6721 in NY before popping briefly to 0.6737 early this morning. The combination of overbought conditions and waning momentum suggest further NZD strength is unlikely for today. That said, it is too early to expect a significant pull-back as NZD is more likely to consolidate its gains and trade sideways. Expected range for today, 0.6700/0.6740.

1-3 WEEKS VIEW A NY close above 0.6720 would indicate further NZD strength to 0.6760. We have expected a stronger NZD since 20 Jun (spot at 0.6555) wherein we held the view “the recovery in NZD could test 0.6620”. As NZD strengthened, we upgraded the outlook a few times (see annotations in chart below) and our latest narrative was from last Friday (28 Jun, spot at 0.6700) where we indicated that “if NZD were to close above 0.6720, it would indicate the ‘positive phase’ could extend further to 0.6760”. NZD touched 0.6721 during NY hours on Friday before extending its gains early this morning. Despite the relatively strong gains, upward momentum has not improved by much and the odds for NZD to extend its advance to 0.6760 are not high. However, only a break of the 0.6660 ‘key support’ (level was at 0.6630 last Friday) would indicate that the current ‘positive phase’ has run its course.

USD/JPY: 

24-HOUR VIEW USD is expected to consolidate and trade sideways, likely between 107.90 and 108.50. USD traded in quiet manner between 107.55 and 107.93 last Friday but gapped higher upon opening this morning. The surge appears to be running ahead of itself and further gains appear unlikely. USD is more likely to consolidate and trade sideways for today, expected to be between 107.90 and 108.50.

1-3 WEEKS VIEW USD is expected to trade sideways but is likely to test the top of the expected range first. We have held the same view since last Thursday (27 Jun, spot at 107.75) wherein USD is “expected to trade sideways” but is “likely to test the top of the expected 107.00/108.40 range first”. USD closed little change in NY on Friday (107.88, +0.09%) but popped higher this morning and appears to have moved briefly above 108.40. In other words, there is no change in our view and only a NY close above 108.40 would indicate that USD has moved into a ‘positive phase’. The prospect for such a scenario is not very high for now but would continue to increase as long the strong support at 107.50 is intact.

Source:
UOB Research/Market Commentary

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