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Thomson Reuters
Jun 13 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on Jun 13 - 12:00 AM

EUR/USD: 

24-HOUR VIEW EUR is expected to extend its decline but strong 1.1250 support is unlikely to come under threat for now. Instead of “edging above last week’s 1.1347 peak”, EUR plummeted after touching 1.1343. While the sharp and rapid drop appears to be running ahead of itself, the weakness is not showing sign of stabilizing. From here, barring a move above 1.1335 (minor resistance at 1.1310), EUR is expected to extend its decline even though the strong 1.1250 support is unlikely to come under threat for now (minor support at 1.1270).

1-3 WEEKS VIEW Diminished odds for further EUR strength. The relatively steep decline of -0.37% yesterday (12 Jun) has further dented further the fragile upward momentum and the chance EUR to test the strong 1.1380 resistance appears to be slipping away. However, only a breach of the 1.1250 ‘key support’ (no change in level) would indicate that the ‘positive phase’ that started last Tuesday (04 Jun, spot at 1.1245) has ended. In order to revive the current flagging momentum, EUR has to move and stay above 1.1335 within these 1 to 2 days or a break of the ‘key support’ would not be surprising. Looking ahead, a move below 1.1250 would indicate EUR could trade sideways for a period (a sustained decline in EUR is not expected).

GBP/USD: 

24-HOUR VIEW GBP is expected to move lower but any weakness is likely limited to a test of 1.2650. While the registered range of 1.2682/1.2759 is close to our expected sideway trading range of 1.2690/1.2760, the soft daily closing of 1.2690 has weakened the underlying tone. That said, momentum is patchy at best and any weakness is likely limited to a test of Monday’s (10 Jun) low near 1.2650. The next support at 1.2610 is not expected to come into the picture. On the upside, any intraday GBP strength is not expected to move beyond 1.2760 (1.2730 is already a rather strong resistance).

1-3 WEEKS VIEW GBP is expected to trade sideways. The ‘sideway-trading’ phase that started last Tuesday (04 Jun, spot at 1.2665) is still clearly intact as GBP traded well within our expected 1.2570/1.2770 range since then. Momentum indicators are mostly neutral and we continue to expect GBP to trade within the range mentioned above. Looking ahead, barring a break of 1.2570, the current ‘sideway-trading’ phase is likely to be resolved by a move above the top of the expected range.

AUD/USD: 

24-HOUR VIEW Further AUD weakness is not ruled out but oversold conditions suggest 0.6900 is unlikely to break. Expectation for AUD to trade sideways was incorrect as it slumped to 0.6925 before ending the day on a weak note (NY close of 0.6929). The decline has moved into oversold territory and while a dip below the 0.6920 support would not be surprising, the 0.6900 level is unlikely to come under threat. All in, AUD is expected to remain under pressure unless it can reclaim 0.6960.

1-3 WEEKS VIEW AUD is expected to trade sideways. While our 0.6920 ‘key support’ is still intact (overnight low of 0.6925), the weak daily closing (NY close of 0.6929, -0.45%) is enough to indicate the recent mild upward pressure has eased (we have expected AUD to trade with an ‘upside bias’ since last Tuesday, 04 Jun). From here, AUD is deemed to have moved into a ‘sideway trading’ phase and while a test of last month’s 0.6865 low is not ruled out, any weakness is viewed as part of 0.6865/0.6990 range (at this stage, the prospect for a sustained decline below 0.6865 is not high).

NZD/USD: 

24-HOUR VIEW NZD is expected to trade sideways, likely between 0.6560 and 0.6600. Yesterday, we held the view that the weakness in NZD “could test 0.6560 before stabilizing”. NZD subsequently dipped to 0.6566 before trading mostly sideways. While downward pressure has waned, it is too early to expect a recovery. NZD is more likely to trade sideways (to slightly higher) for now, expected to be between 0.6560 and 0.6600.

1-3 WEEKS VIEW NZD is expected to trade sideways. No change in view from yesterday, see reproduced update below.

We highlighted yesterday the “prospect for further NZD strength has diminished” and the subsequent breach of the 0.6600 ‘key support’ was not surprising. The price action indicates that the ‘positive phase’ that started last Tuesday (04 Jun, spot at 0.6585) has ended. From here, NZD is deemed to have moved into a ‘sideway-trading’ phase even though the immediate bias is for it probe the bottom of the expected 0.6530/0.6630 range. 

USD/JPY: 

24-HOUR VIEW USD is expected to trade sideways between 108.25 and 108.75. USD traded between 108.20 and 108.57, a lower and narrower range than our expected 108.30/108.80. The little changed daily closing (108.49, -0.01%) offers no fresh clues and momentum indicators are still mostly neutral. USD is likely to continue to trade sideways for now, likely between 108.25 and 108.75.

1-3 WEEKS VIEW Diminished odds for further USD weakness. No change view from yesterday, see reproduced update below. However, the ‘key resistance’ has moved lower to 109.05 from 109.30.

USD edged higher and touched 108.79 yesterday (11 Jun) before easing off to end the day little changed at 108.50 (+0.06%). The price action offers no fresh clue and the current narrative still remains unchanged wherein the ‘negative phase’ in USD is still intact, the “odds for further weakness have diminished”. In order to revive the flagging momentum, USD has to move and stay below 108.30 within these few days or the risk of a break of the 109.30 ‘key resistance’ (no change in level) would increase quickly. Looking forward, if the ‘key resistance’ is taken out, it would signal the start of a ‘sideway-trading’ phase that could last for a while.

Source:
UOB Research/Market Commentary

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