EUR/USD: Neutral (since 05 Jun 18, 1.1700): Break of 1.1505/10 would not surprise but prospect of a sustained decline is not high. No change in view.
Our recent expectation for a stronger rebound in EUR was proven wrong as the break of the 1.1605 ‘key support’ yesterday resulted in a sharp drop to a low of 1.1539. From here, market is clearly eyeing the 1.1505/10 support as this level was tested twice in recent weeks but held (low of 1.1506 in late May and 1.1507 last week). The weakened undertone suggests that a break below this level would not be surprising but at this stage, the prospect for a period of sustained weakness in EUR below this strong support does not appear to be high (indicators have yet to fully unwind from oversold levels). All in, we expect EUR to stay under pressure, especially within the next several days and a break of 1.3505/10 could lead to a move to 1.3460. On the upside, the ‘key resistance’ is at 1.1670 even though a break above 1.1620 would indicate that the current fledgling downward pressure has eased.
GBP/USD: Neutral (since 25 Jun, spot at 1.3265): GBP under pressure but weakness could be limited to 1.3040.
As highlighted yesterday, GBP is under pressure but oversold conditions suggest that weakness could be limited to 1.3040. GBP subsequently dropped to an overnight low of 1.3050 before staging a mild recovery. While we continue to adopt a ‘negative’ GBP view for now, we do not see high odds for a period of sustained weakness. That said, an ‘overshoot’ below 1.3040 is not ruled out but at this stage, a break of 1.3000 would come as a surprise (at least within the next couple of days). On the upside, the ‘key resistance’ has moved lower from 1.3235 to 1.3190 and only a break of this level would indicate that the current weakness has stabilized.
AUD/USD: Bearish (since 20 Jun 18, 0.7385): Next ‘target’ at 0.7300 may be tough to crack.
After the large drop on Wednesday (27 Jun), AUD traded in a muted manner yesterday and registered a relatively narrow range. As highlighted, while the outlook for AUD is still bearish, downward momentum has not improved all that much and the next support at 0.7300 may be a tough level to crack. The price action yesterday seems to reinforce our view but only a break of 0.7420 would indicate that the current bearish phase has ended.
NZD/USD: Bearish (since 28 Jun 18, 0.6785): Decline approaching oversold but could extend to 0.6720.
We just turned bearish on NZD yesterday (28 Jun, spot at 0.6785) and there is no change to the view. As highlighted, while oversold, the current decline could extend further to 0.6720 (next support is at 0.6700). We will maintain a bearish NZD view until 0.6830 is taken out (level previously at 0.6860).
USD/JPY: Neutral (since 21 Feb 18, 107.35): Undertone has improved but a sustained up-move seems unlikely.
As highlighted yesterday, the recent ‘whippy’ price actions offer no fresh clues on the USD direction and we continue to hold a neutral stance. USD tested the top end of our expected 109.10/110.65 consolidation range yesterday (overnight high of 110.64) before ending the day on a strong note. The undertone has improved somewhat but for the next couple of days, a sustained break above 111.00 seems unlikely.