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Thomson Reuters
May 06 - 01:24 AM
First appeared on eFXplus on May 06 - 12:00 AM


24-HOUR VIEW: Short-term EUR strength has scope to extend 1.1225. We expected “further weakness in EUR” last Friday but were of the view that any decline is “likely limited to a probe of 1.1145”. EUR subsequently dipped to 1.1133 before staging a surprisingly rapid and robust recovery. While there is not much improvement in momentum, the short-term EUR strength has scope to extend to 1.1225. For today, a break above last week’s 1.1265 top is not expected. Support is at 1.1165 followed by Friday’s low near 1.1135.

1-3 WEEKS VIEW: EUR is expected to trade sideways. After closing lower for two consecutive days, EUR rebounded strongly on Friday (from a low of 1.1133) and ended on a firm note (NY close of 1.1200, +0.21%). The price action reinforces our current view wherein EUR is “expected to trade sideways” between the strong levels of 1.1110 and 1.1265. As highlighted previously, there is no early indication on which level is more ‘vulnerable’.


24-HOUR VIEW: GBP strength could extend further but a sustained rise above 1.3200 appears unlikely for now. GBP surged to a high of 1.3177 last Friday before ending the day on a very strong note at 1.3176. While overbought, the rally is not showing sign of slowing down just yet. From here, barring a move below 1.3075 (minor support at 1.3100), the current GBP strength could extend further. That said, a sustained rise above 1.3200 appears unlikely for now.

1-3 WEEKS VIEW: Odds for a break of the April’s peak of 1.3196 have improved. We have held the same view since last Thursday (02 May, spot at 1.3050) wherein the “rebound in GBP has scope to extend to 1.3130”. We also indicated, “at this stage, the prospect for a move to the April’s peak of 1.3196 is not high”. However, after Friday’s strong surge (GBP closed higher by a whopping +1.10% at 1.3176), the odds for a break of 1.3196 have improved considerably. However, there are a couple of strong resistance levels above 1.3196 and for now; it is premature to expect a move to the year-to-date high of 1.3380. Overall, the current ‘positive phase’ in GBP is expected to remain intact as long as the 1.3035 is not taken out (‘key support’ was previously at 1.2975).


24-HOUR VIEW: A dip below the 0.6950 support would not be surprising. We expected AUD to weaken last Friday but were of the view that “0.6970 is likely out of reach”. AUD subsequently dipped to 0.6985 before rebounding to close at 0.7025. Trump’s tweet sent AUD gapping lower upon opening this morning and from here, a dip below the 0.6950 support would not be surprising (this level is followed by a rather strong support zone between 0.6900 and 0.6910). On the upside, 0.7025 is expected to be strong enough to cap any intraday rebound (0.7010 is already quite a strong level).

1-3 WEEKS VIEW: Break of 0.6950 would shift focus to 0.6910. The negative phase in AUD that started more than a week ago (see update on 25 Apr, spot at 0.7015) is still clearly intact. Last Friday, we indicated that in view of lackluster momentum AUD could “drift” lower to lower to 0.6950. While AUD ended last Friday on a firm note (NY close of 0.7025, +0.35%), the sudden lurch lower this morning suggests that a break of 0.6950 would not be surprising. A break of this level would shift the focus to 0.6910. On the upside, only a break the 0.7060 ‘key resistance’ (no change in level for now) would indicate that the current negative phase has ended.


24-HOUR VIEW: NZD could challenge last week’s low near 0.6580. Expectation for NZD to “drift lower to 0.6595” last Friday did not materialize as it recovered after touching 0.6606. NZD gapped down upon opening this morning and from here, NZD could challenge last week’s low near 0.6580. For now, a sustained decline below this level appears unlikely (next support is at 0.6550). Resistance is at 0.6625 followed by 0.6640. Last Friday’s 0.6653 top is not expected to come into the picture.

1-3 WEEKS VIEW: Short-term bottom in place, NZD has likely moved into a consolidation phase. No change in view from last Friday, see reproduced update below. NZD tested the bottom of our expected 0.6610/0.6730 sideway-trading range as it touched 0.6609. The underlying tone has clearly softened even though it is unclear at this stage whether NZD is ready to challenge last week’s 0.6581 low. For now, we continue to hold the view that 0.6581 is a short-term bottom and that the current movement is part of a consolidation phase. However, a NY close 0.6595 would greatly increase the odds for further NZD weakness to 0.6550.


24-HOUR VIEW: USD is expected to consolidate its loss and trade sideways to slightly lower. The strong gap down in USD this morning appears to be running too fast, too soon. That said, it is too early to expect a recovery. USD is more likely to consolidate its loss and trade sideways to slightly lower. Expected range for today, 110.30/111.00

1-3 WEEKS VIEW: Focus is at the March low of 109.70. The week-long consolidation phase ended with a bang as USD nose-dived early this morning and cracked a couple of solid supports with ease. USD is deemed to have moved into a negative phase and the focus is at the March low of 109.70. This is a rather solid support and may not yield as easily. All in, USD is expected to trade under pressure in the coming days as long as the 111.45 ‘key resistance’ is intact

UOB Research/Market Commentary


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