EUR/USD: Neutral (since 21 Aug 18, 1.1485): The major 1.1400 support appears to be ‘vulnerable’.
We indicated yesterday (18 Oct, spot at 1.1505) EUR could “weaken further in the coming days” but highlighted “strong support is expected at 1.1430”. However, the subsequent decline was more rapid and ‘impulsive’ than expected as EUR plummeted to a low of 1.1447. The price action not only suggests a break of 1.1430 seems likely now but also the next support at 1.1400 is ‘vulnerable’. Looking ahead, a clear break of 1.1400 would be a good indication that EUR could threaten the year-to-date low near 1.1300. All in, we expect EUR to stay on the defensive in the coming days unless it can reclaim 1.1540 (‘key resistance’ was at 1.1590 yesterday).
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Break of 1.3000 would shift focus to 1.2920/25.
GBP plunged and lost -0.70% yesterday as it closed at 1.3019 in NY. While the bottom of our expected 1.3000/1.3250 consolidation range is still intact, the impulsive decline suggests further GBP weakness is likely in the coming days. As highlighted yesterday (18 Oct, spot at 1.3110), “a break of 1.3000 would suggest that GBP is ready to tackle the 1.2922 low seen earlier this month” (even though the anticipated price action has evolved much faster than expected). In other words, instead of trading sideways, GBP has likely moved into a ‘negative’ phase. Only a break of the ‘key resistance’ at 1.3125 would indicate that the current downward pressure has eased.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD likely to trade within a broad range.
There is not much to add as AUD hardly budged and remains within a 0.7095/0.7160 range since late last week. The underlying tone has weakened somewhat but at this stage, we are comfortable in holding the same view (since last Friday, 12 Oct, spot at 0.7120) wherein AUD is trading within a broad 0.7040/0.7200. From here, 0.7040/0.7160 is likely enough to contain the movement in AUD, at least for the next one week or so.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Upward pressure has eased, NZD to trade sideways for now. No change in view.
In our update on Tuesday (16 Oct, spot at 0.6575), we highlighted “a break above 0.6600 would not be surprising” but added, “only a clear break of 0.6630 would indicate that NZD is ready for a stronger recovery”. NZD touched a 2-week high of 0.6602 yesterday (17 Oct) but succumbed to selling pressure and ended the day on a weak note (NY close of 0.6550, -0.57%). While the ‘key support’ at 0.6530 is still intact, the weak daily closing is enough to indicate that the recent upward pressure has eased. That said, there is no change to the overall neutral outlook but NZD is expected to trade sideways from here, likely within a 0.6480/0.6600 range.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD has moved into a consolidation phase.
There is not much to add to yesterday’s (18 Oct, spot at 112.65) update. As highlighted, the 111.61 low registered on Monday (15 Oct) is likely a short-term bottom and USD has moved into a 111.80/113.30 consolidation range. Looking ahead, the risk of a break of the bottom of the range appears to be higher but even then, any decline has to contend with the rather strong support zone between 111.50 and 111.60.