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Thomson Reuters
Nov 09 - 09:48 AM
First appeared on eFXplus on Nov 08 - 10:19 PM

EUR/USD: Neutral (since 21 Aug 18, 1.1485): Scope for EUR to retest 1.1300.

While we highlighted yesterday the “immediate bias it tilted to the downside”, the subsequent pace of decline has been much faster than expected. Not only the drop was faster than expected, EUR also cracked the strong 1.1370 support (NY low of 1.1350). The rapid and sharp turnaround from the Wednesday’s (07 Nov) peak of 1.1500 suggests there is scope for EUR to retest the major 1.1300 support in the coming days. At this stage, the prospect for a sustained move below this major support is not high (note that EUR tried to break clearly below 1.1300 in mid-August and late October but failed on both occasions). All in, we are adopting a slightly ‘negative’ stance now and expect EUR to edge lower from here. Only a move back above the 1.1450 ‘key resistance’ would indicate that the current mild downward pressure has eased.

GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Rebound could extend further but a break of 1.3190 would be surprising.

GBP broke its 3-day winning streak and closed lower at 1.3061 in NY (down by -0.51%). We continue to hold the same view as highlighted on Wednesday (07 Nov, spot at 1.3100) wherein it would be surprising if the recent rebound in GBP could break 1.3190. However, only a move below the 1.3000 ‘key support’ (no change in level) would indicate that a short-term top is in place. Until then, there is still a chance, albeit a slim one, that GBP could stage another ‘up-leg’ to towards 1.3190.

AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Anticipating further AUD strength to 0.7315. No change in view.

We have held the same view since last Friday (02 Nov, spot at 0.7205) wherein there is “scope for AUD to test the key and critical 0.7260 resistance”. We added, a break of this ‘key and critical’ resistance would suggest that the 0.7021 low seen on 26 Oct could be a mid to long-term bottom. From here, we are anticipating AUD to continue to move higher to the September’s peak of 0.7315. A breach of this level would shift the focus to 0.7380. On the downside, the ‘key support’ has moved higher to 0.7150 from 0.7110 yesterday. All in, we expect AUD to stay underpinned in the coming days as long as the ‘key support’ is intact.

NZD/USD: Neutral (since 20 Aug 18, 0.6625): Further NZD strength is not ruled out but 0.6850 is likely out of reach. No change in view.

There is not much to add to yesterday’s (07 Nov, 0.6740) update. As highlighted, “further NZD strength is not ruled out but 0.6850 is likely out of reach”. That said, the rapid manner of which NZD rose to a high of 0.6820 during late NY hours was not exactly expected. For now, we continue to hold the view that 0.6850 could be out of reach but looking ahead, a NY closing above this level would suggest that the ‘positive’ phase that started last Friday (02 Nov, spot at 0.6645) has morphed into a bullish phase. Meanwhile, only a move back below the ‘key support’ at 0.6670 (level was at 0.6640 yesterday) would indicate that a short-term top is in place.

USD/JPY: Neutral (since 09 Oct 18, 113.10): Focus is at 114.54 now.

While we highlighted yesterday (08 Nov, spot at 113.55) “there is good chance for USD to move to 114.00”, the pace of the advance has been faster than anticipated (USD touched 114.08 during NY hours). As highlighted, a break of 114.00 would shift the focus to the October’s peak of 114.54. At this stage, the odds for a sustained move above 114.54 are not high. All in, we continue to expect USD stay underpinned in the coming days as long as the 113.20 ‘key support’ is intact (level previously at 112.90

UOB Research/Market Commentary


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