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Jul 02 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on Jul 02 - 12:00 AM

EUR/USD: 

24-HOUR VIEW Rapid drop in EUR has room to extend a little further but weakness is likely limited to 1.1255. We highlighted yesterday that the recent consolidation “appears to be close to completion” and added, “a clear break out of the 1.1340/1.1400 range would indicate the start of a more sustained directional move”. That said, the extent and pace of the subsequent decline was not exactly expected as EUR plummeted by -0.73%, the largest 1-day decline in 2 months (closed at 1.1285). The rapid drop appears to have room to extend a little further but for today, any weakness is likely limited to 1.1255 (next support is at 1.1220). On the upside, 1.1345 is expected to be strong enough to cap any intraday recovery (minor resistance is at 1.1320).

1-3 WEEKS VIEW EUR is in a sideway-trading phase. While we noted the “flagging momentum” yesterday, the ease of which EUR cracked the 1.1290 ‘key support’ and the subsequent weak daily closing at 1.1285 in NY (-0.73%) came as a surprise. The ‘positive phase’ that started on 24 Jun (spot at 1.1375) has ended and last week’s 1.1412 high is deemed as a short-term top (our previous view was for the rally in EUR to extend to 1.1450). After yesterday’s price action, EUR is viewed to have moved into a ‘sideway-trading phase’ and is likely to trade within a relatively broad range of 1.1200/1.1370.

GBP/USD: 

24-HOUR VIEW GBP is expected to drift lower to 1.2605. Our view for GBP to “retest last Friday’s peak of 1.2735” was incorrect as it dropped sharply and cracked the strong 1.2650 support (overnight low of 1.2633). Downward momentum has ticked up albeit not by much and from here, barring a move above 1.2700 (minor resistance is at 1.2675), GBP is expected to drift lower to 1.2605.

1-3 WEEKS VIEW GBP is in a sideway-trading phase, likely to probe bottom of range first. The break of the strong 1.2650 support was not exactly surprising as we indicated yesterday despite the rebound last Friday, “upward momentum has not improved by much”. The breach of the strong support indicates that instead of trading with an ‘upside bias’, GBP is likely to ‘trade sideways’ from here, expected to be between 1.2570 and 1.2725. That said, the slightly weakened underlying tone suggests the immediate bias is for GBP to probe the bottom of the range first.

NZD/USD: 

24-HOUR VIEW Rapid decline in NZD has scope to test 0.6645 first before stabilizing. We highlighted yesterday “the combination of overbought conditions and waning momentum suggest further NZD strength is unlikely for today”. However, the subsequent sharp pull-back in NZD that hit an overnight low of 0.6665 came as a surprise. The rapid decline appears to have scope to test the 0.6645 support first before stabilizing. Resistance is at 0.6700 but the stronger level is at 0.6715.

1-3 WEEKS VIEW NZD is expected to trade sideways. We indicated yesterday (01 Jul, spot at 0.6720), “despite the relatively strong gains, upward momentum has not improved by much and the odds for NZD to extend its advance to 0.6760 are not high” and added, “only a NY close above 0.6720 would indicate further NZD strength to 0.6760”. However, the subsequent swift and sharp drop to an overnight low of 0.6665 was not exactly expected. While the 0.6660 ‘key support’ is still intact, the price action is enough to indicate that the early Sydney hours high of 0.6737 yesterday is a shortterm top. From here, NZD is deemed to have moved into a ‘sideway-trading phase’ and is expected to trade within a relatively broad 0.6610/0.6730 range.

USD/JPY: 

24-HOUR VIEW USD could drift lower and test the bottom of the expected 108.00/108.55 range first. USD traded between 108.09 and 108.53 yesterday, narrower than our expected range of 107.90/108.50. While USD is likely to continue to trade sideways, the slightly weakened underlying tone suggests it could drift lower and test the bottom of the expected 108.00/108.55 range first.

1-3 WEEKS VIEW USD is expected to trade towards the June’s peak of 108.80. USD closed above 108.40 in NY (108.43) and as indicated yesterday, this would suggest USD has moved into a ‘positive phase’. From here, barring a move below the 107.65 ‘key support’, USD is expected to move towards the June’s peak of 108.80 (next resistance is at 109.00). That said, overbought shorter-term conditions could lead to a couple of days of consolidation first.

Source:
UOB Research/Market Commentary

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