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Thomson Reuters
May 31 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on May 31 - 12:00 AM

EUR/USD: 

24-HOUR VIEW: EUR could dip below the major 1.1100 level but a sustained decline is not expected. We expected EUR to weaken yesterday but held the view “a break of 1.1100 is unlikely”. EUR subsequently dipped to 1.1114 before recovering to end the day little changed (1.1130). Despite the recovery, the underlying tone remains soft and for today, EUR could test the major 1.1100 level. A dip below this level would not be surprising but a sustained decline is not expected (next support is at 1.1070). On the upside, only a move above 1.1170 would indicate the current soft patch in EUR has stabilized (minor resistance is at 1.1150).

1-3 WEEKS VIEW: EUR is expected to trade with downside bias and test 1.1100/05. There is not much to add to the update from yesterday (30 May, spot at 1.1135). As highlighted, the underlying tone in EUR has weakened but EUR has to register a daily closing below the major 1.1100/05 support level in order to indicate that a move to 1.1050 has started. In view of the lackluster momentum, the prospect for such a scenario is not high but EUR has to move above 1.1190 (level was at 1.1205 yesterday) in order to indicate that the current mild downward pressure has eased. Meanwhile, EUR is expected to trade with a downside bias and test 1.1100/05.

GBP/USD: 

24-HOUR VIEW: GBP could retest the low near 1.2580 but next support at 1.2555 is not expected to come into the picture. We highlighted yesterday “there is room for GBP to test 1.2600 first before a rebound can be expected”. However, GBP cracked 1.2600 and dropped to 1.2581 but the weakness was short-lived. While downward momentum is beginning to wane, it is too soon to expect a sustained recovery. From here, barring a move above 1.2650, GBP could retest the low near 1.2580. For today, the next support at 1.2555 is not expected to come into the picture.

1-3 WEEKS VIEW: GBP is expected to trade with a downside bias. We shifted our narrative to “GBP is expected to trade with a downside bias” yesterday (30 May, spot at 1.2630) and added, “1.2600 is acting as an ‘attraction’”. Unsurprisingly, GBP moved below 1.2600 (overnight low of 1.2581) but the decline clearly lacks momentum. As highlighted yesterday, GBP has to register a daily closing below 1.2600 in order to indicate the start of a ‘negative phase’ towards 1.2530. The risk for such a scenario is not high for now but would continue to increase unless GBP can move back above 1.2685 (level was at 1.2720 yesterday).

AUD/USD: 

24-HOUR VIEW: AUD could dip below the overnight low of 0.6898 but the next support at 0.6880 is likely out of reach. AUD traded between 0.6898 and 0.6936 yesterday, relatively close to our expected 0.6900/0.6940 range. The underlying tone has weakened somewhat and from here, AUD could dip below the overnight low of 0.6898 but the next support at 0.6880 is likely out of reach. On the upside, 0.6940 is expected to be strong enough to cap any intraday AUD strength.

1-3 WEEKS VIEW: Short-term bottom in place, AUD is expected to trade sideways. AUD spent another day ‘going nowhere’ as it closed little changed at 0.6911 (-0.08%). The quiet price action is line with our expectation from Monday (27 May) wherein AUD is “expected to trade sideways” for a couple of weeks. Note that for the past few days, the daily change in AUD has been less than 0.10%. Looking ahead, the ‘sideway-trading phase’ is more likely to be resolved with the start of fresh ‘negative phase’ but this is only upon a clear break of 0.6860. Meanwhile, a 0.6860/0.6985 range is expected to be more than enough to contain the price action in AUD for another week or so.

NZD/USD: 

24-HOUR VIEW: NZD is expected to consolidate, likely within a 0.6495/0.6525 range. We held the view yesterday that NZD “could dip below 0.6500 but last week’s low of 0.6482 is unlikely to come under threat”. NZD subsequently dipped briefly to 0.6495 before recovering. Downward pressure has waned somewhat but it is too early to expect a sustained recovery. NZD is more likely consolidate at these lower levels, expected to be within a 0.6495/0.6525 range.

1-3 WEEKS VIEW: Short-term bottom is in place; NZD is expected to trade sideways. No change in view from yesterday, see reproduced update below. After trading in a subdued manner for a couple of days, NZD staged a relatively sharp drop that came close to the bottom our expected 0.6500/0.6610 range (low of 0.6504). While the underlying tone has clearly weakened, it is too soon to expect the start of a fresh ‘negative phase’. Only a daily closing below 0.6470 would indicate that NZD is ready to move to 0.6425. Meanwhile, the current price action is still deemed as a ‘sideway-trading phase’ but after yesterday’s price action, we have lowered the expected range to 0.6480/0.6570 (from 0.6500/0.6610).

USD/JPY: 

24-HOUR VIEW: Immediate risk is for more USD weakness but prospect for a break of the solid 109.00 support is not high. We highlighted yesterday the “advance in USD could extend further but the strong 110.00 resistance is unlikely to crack”. In line with expectation, USD touched 109.92 before easing off to end the day at 109.60. Trump’s tariff on Mexico early this morning sent USD tumbling and the immediate risk is for more USD weakness. That said, 109.00 is a solid support and from here, the prospect for a break of this level is not high. On the upside, the 109.92 is not expected to come into the picture; 109.70 is already a strong level.

1-3 WEEKS VIEW: USD has moved into a sideway-trading phase. USD rose to 109.92 yesterday before dropping back quickly. While Trump’s imposition of tariff on Mexico earlier this morning sent USD tumbling, the current ‘sideway-trading phase’ is still intact. In other words, USD is expected to continue to trade between 109.00 and 110.30 for now. Looking ahead, the current consolidation is expected to be resolved by a downside break but 109.00 is a solid support and this level may hold for a while more. That said, if USD were to register a daily closing below this level, it would indicate the start of a sustained decline to 108.45 (and possibly lower).

Source:
UOB Research/Market Commentary

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