EUR/USD: Neutral (since 21 Aug 18, 1.1485): Clear break above 1.1620 would shift focus to 1.1700.
EUR tried but failed to maintain a toehold above 1.1600 for the third consecutive day yesterday (16 Oct). That said, it managed to touch a fresh 2-week high of 1.1621. We have held the same view that “a clear break above 1.1620 would shift the focus to 1.1700” since last Friday (12 Oct, spot at 1.1590). The prospect for a clear break above 1.1620 has diminished but only a move below 1.1520 (no change in ‘key support’ level) would indicate that the current upward pressure has eased. Meanwhile, further attempts to break above 1.1620 are not ruled out but time is not on the side for those looking for a higher EUR. Looking ahead, a break of the ‘key support’ would not change the current neutral outlook but suggest the start of a period of sideway consolidation.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP is expected to trade sideways.
GBP moved above the top of our previously expected 1.3040/1.3220 range yesterday as it briefly hit a high of 1.3235. Despite the overall positive price action, we continue to view the current movement as part of a sideways consolidation range and we have doubts about the sustainability of further short-term GBP strength. That said, GBP could probe last week’s top near 1.3260 but at this stage, we view any advance as part of a higher 1.3080/1.3260 range and not the start of a sustained up-move.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD likely to trade within a broad range.
AUD edged to a 2-week high of 0.7152 yesterday before ending the day on a firm note (NY close of 0.7142, +0.15%). The up-move lacks momentum and while further AUD strength is not ruled out in the coming days, we view any up-move as part of a broad 0.7040/0.7200 consolidation range. The overall price does seem to suggest that AUD is attempting to base out (from a mid-term perspective) but as highlighted in recent updates, this process could take up to a few weeks.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): A sustained rebound only if above 0.6630. No change in view, see update from yesterday below. However, ‘key support’ has moved higher to 0.6530 from 0.6500.
While we expect NZD to trade sideways, we highlighted last Friday (12 Oct, spot at 0.6525), “the prospect for a break above 0.6560 has increased but the next resistance at 0.6600 is likely strong enough to thwart any further advance in NZD (at least for another one week or so)”. NZD hit a high of 0.6557 during NY hours yesterday before blasting above 0.6560 after the release of the stronger than expected NZ inflation data earlier this morning. The high at the time of writing is 0.6598 and in view of the vastly improved momentum, a break above 0.6600 would not be surprising. That said, we have doubts about the sustainability of the current NZD strength and in our view, only a clear break of 0.6630 would indicate that NZD is ready for a stronger recovery towards the September’s peak near 0.6700. All in, NZD is expected to stay underpinned from here as long as the ‘key support’ at 0.6500 is intact.
USD/JPY: Neutral (since 09 Oct 18, 113.10): Prospect for a break of 111.50 has increased.
Despite the strong rebound in USD yesterday (NY close of 112.25, +0.43%), we still chance that it could break below the strong 111.50 support (as highlighted yesterday, 16 Oct). Only a break of the ‘key resistance’ at 112.70 (no change in level) would indicate that the correction phase that started last Tuesday (09 Oct, spot at 113.10) has ended. That said, in order to the revitalize the current waning momentum, USD has to move and stay below 111.85 within these 1 to 2 days or the odds for a dip below 111.50 would diminish quickly. Looking forward, a break above the ‘key resistance’ would not change the overall neutral outlook but suggest USD would trade sideways at a higher range.