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Thomson Reuters
Jul 10 - 01:24 AM
First appeared on eFXplus on Jul 09 - 11:08 PM

EUR/USD: Neutral (since 05 Jun 18, 1.1700): Outlook for EUR is positive, break of 1.1790 could lead to rapid rise to 1.1850.

We highlighted yesterday that the outlook for EUR is ‘positive’ and were of the view that a “break of 1.1790 could lead to rapid rise to 1.1850”. The 1.1790 resistance was subsequently ‘tested’ but held (high of 1.1790 during NY hours). From here, it is too early to rule out another attempt to crack 1.1790 and only a move back below the ‘key support’ at 1.1680 (level previously at 1.1665) would indicate that a temporary top is in place. That said, as highlighted yesterday, 1.1850 is acting as a major resistance and is unlikely to yield so easily.

GBP/USD: Neutral (since 25 Jun, spot at 1.3265): Upward pressure has eased, GBP has moved into a consolidation phase.

GBP hit a ‘fresh’ high of 1.3363 yesterday before news of Boris Johnson’s resignation sent it tumbling to a low of 1.3189. The breach of the ‘key support’ at 1.3200 suggests that the recent upward pressure has eased. While there is no change to the neutral outlook, GBP has likely moved into a consolidation phase and is expected to trade sideways for the next several days, likely within a broad 1.3150/1.3350 range. Looking further ahead, the bias appears to be tilted to the upside but the levels just below 1.3400 are acting as a major resistance zone now and it may take a while before GBP is ready to challenge this zone.

AUD/USD: Neutral (since 05 Jul 18, 0.7380): Scope for a stronger rebound to 0.7500.

We highlighted the improved undertone in AUD yesterday and were of the view that there is “scope for AUD to stage a stronger rebound to 0.7500”. AUD subsequently hit a high of 0.7484 and our view remains unchanged. The prospect for a clear break above 0.7500 is still not that high but it would continue to improve as long as the ‘key support’ at 0.7400 is intact (level previously at 0.7370). Looking further ahead, a clear break above 0.7500 would suggest that AUD is ready to tackle the next major level at 0.7570.

NZD/USD: Neutral (since 06 Jul, 0.6795): Break of 0.6850/60 would suggest a stronger recovery in NZD. No change in view.

We just shifted from a bearish to neutral stance last Friday (06 Jul, spot at 0.6795) and there is no change to the view. That said, NZD subsequently advanced quickly and is currently approaching the strong 0.6850/60 resistance. A break above this level would indicate a marked improvement in the underlying tone and could lead to a stronger recovery to 0.6890, with lower odds for extension to 0.6920.

USD/JPY: Neutral (since 21 Feb 18, 107.35): USD to stay supported but any strength is unlikely to be sustained.

We have held the same view since last Monday (02 Jul, spot at 110.75) wherein “USD is to stay supported but any strength is unlikely to be sustained”. After trading mostly sideways since then, USD perked up in overnight trading and is currently approaching last week’s peak at 111.13. A move above 111.13 seems likely but the next level at 111.50 is a major level and is expected to offer solid resistance. To put it another way, the prospect for a clear break above 111.50 does not appear to be high at this stage. On the downside, only a break of the ‘key support’ at 110.30 (level previously at 110.10) would indicate that the current upward pressure has eased.

UOB Research/Market Commentary


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