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.
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.
The clear break of the 1.3175 support yesterday was unexpected and the focus is clearly at 1.3100 now (this level was tested but held last week with a low of 1.3102). The weak daily closing yesterday indicates that the pressure has shifted to the downside but in view of the still oversold conditions, any weakness could be limited to the 1.3040. In order to maintain the current downward momentum, GBP should not move back above the ‘key resistance’ at 1.3235. In the shorter-term, 1.3190 is already a strong level.
AUD/USD: Bearish (since 20 Jun 18, 0.7385): Next ‘target’ at 0.7300 may be tough to crack.
We highlighted yesterday that the current bearish phase appears to be close to ending unless AUD “can ‘punch’ through last week’s low of 0.7345”. AUD broke this strong support during NY hours and dropped quickly to a low of 0.7323. From here, the next ‘target’ is at 0.7300 which is another major support level (next support is at 0.7260). That said, indicators are still at oversold level and downward momentum has not improved all that much and 0.7300 may be a tough level to crack. On the upside, the ‘stop-loss’ level has moved lower to 0.7420 from 0.7440.
NZD/USD: Shift from neutral to BEARISH: Decline approaching oversold but could extend to 0.6720.
We highlighted yesterday (27 Jun, spot at 0.6850) that NZD is “under pressure but it is unclear if weakness can be sustained”. We highlighted 2 ‘very strong’ support levels at 0.6800 (round number) and 0.6780 (low in 2017) but NZD broke both levels without much difficulty (overnight low of 0.6778). The subsequent weak closing in NY suggests that NZD has moved into a bearish phase. While approaching oversold, the current decline could extend further to 0.6720. ‘Stop-loss’ is at 0.6860.
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD has likely moved into a broad consolidation phase.
The ‘whippy’ price actions over the past few days offer no fresh clues on the USD direction and we continue to hold a neutral stance. We continue to expect USD to trade sideways within a broad 109.10/110.65 range for now.