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Jun 27 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on Jun 27 - 12:00 AM

EUR/USD: 

24-HOUR VIEW EUR is likely to trade sideways, likely within a 1.1350/1.1405 range. EUR traded between 1.1346 and 1.1390, a narrower range than our expected 1.1330/1.1395. The quiet price action offers no fresh clue and EUR is likely to continue to trade sideways, albeit likely at a slightly higher range of 1.1350/1.1405.

1-3 WEEKS VIEW Scope for rally to extend further but EUR is expected to face solid resistance at 1.1450. There is not much to add as EUR traded in a quiet manner and registered an ‘inside day’ before closing largely unchanged in NY (1.1368, +0.02%). As highlighted yesterday (26 Jun, spot at 1.1365), while upward momentum has waned, we are holding on to our view wherein there is scope for the rally in EUR that started late last week to extend higher. That said, we continue to expect 1.1450 to offer ‘solid resistance’. Only a breach of the 1.1290 ‘key support’ would indicate that that EUR has moved into a ‘sideway-trading phase’.

GBP/USD: 

24-HOUR VIEW GBP could drift higher and test 1.2725 but a sustained rise above this level is not expected. GBP dipped to 1.2664 before recovering to the end the day little changed at 1.2686 (-0.03%). The underlying tone has improved somewhat and GBP could drift higher and test 1.2725. At this stage, a sustained rise above this level is not expected (next resistance is at 1.2755). Support is at 1.2670 but the stronger level is at 1.2650.

1-3 WEEKS VIEW A NY closing above 1.2763 would indicate start of a ‘positive phase’. No change in view from yesterday, see reproduced update below.

While GBP hit a fresh 1-month high of 1.2784, it failed to hold on to its gains and dropped sharply to an overnight low of 1.2672. Our latest narrative from Monday (24 Jun, spot at 1.2745) was only a “NY closing above 1.2763” would indicate that GBP has moved into a ‘positive phase’. After yesterday’s price action, the prospect for such a scenario has diminished but only a break of the strong 1.2650 support would indicate that GBP has moved into a ‘sideway-trading phase’. Meanwhile, the outlook for GBP is still slightly positive but unless it can move and stay above 1.2763 soon, the current weakened momentum would deteriorate quickly.

AUD/USD: 

24-HOUR VIEW AUD is expected to trade sideways, likely between 0.6970 and 0.7005. Instead of trading sideways, AUD moved above the strong 0.6980 resistance and touched 0.6995. Despite the relatively strong advance, upward momentum has not improved by much. That said, it is too early to expect a pull-back. All in, AUD is more likely to consolidate and trade sideways at these higher levels, expected to be between 0.6970 and 0.7005.

1-3 WEEKS VIEW AUD is expected to trade with an ‘upside bias’ and move to 0.7025. Upward momentum has improved considerably as AUD moved clearly above the top of our expected sideway-trading range of 0.6860/0.6980 and closed on a firm note at 0.6985 in NY (+0.33%). As indicated yesterday (26 Jun, spot at 0.6960), a NY closing above 0.6980 would indicate that AUD is ready to challenge the month-to-date high at 0.7025. In other words, AUD has moved out the ‘sideway-trading phase’ and from here, it is expected to trade with an ‘upside bias’ and move to 0.7025. The month-to-date high is a rather strong resistance and at this stage, the prospect for a sustained rise above this level is not very high. However, the risk for a higher AUD is deemed as intact until the strong support at 0.6930 is taken out (level was at 0.6900 yesterday).

NZD/USD: 

24-HOUR VIEW NZD could move above the overnight high of 0.6693 but any advance is viewed as part of a higher 0.6660/0.6700 range. We highlighted yesterday that NZD is “expected to drift lower but a clear break of 0.6600 appears unlikely”. While NZD dropped to a low of 0.6590 after RBNZ’s statement, it staged a surprisingly robust rally that touched an overnight high of 0.6693. The rapid rise is running ahead of itself and while NZD could move above the 0.6693 high, any advance is viewed as a higher trading range of 0.6660/0.6700.

1-3 WEEKS VIEW ‘Positive phase’ in NZD could extend to 0.6720. Our latest narrative was from Tuesday (25 Jun, spot at 0.6620) wherein we held the view that “NZD has moved into a ‘positive phase’ with eyes on 0.6680”. The 0.6680 level was exceeded overnight as NZD surged to 0.6693. While the rapid advance appears to be running ahead of itself, the ‘positive phase’ in NZD has scope to extend to 0.6720. On the downside, the ‘key support’ has moved higher to 0.6600 from 0.6570. Only a break of the ‘key support’ would indicate that the ‘positive phase’ has ended.

USD/JPY: 

24-HOUR VIEW Advance in USD has scope to extend higher but a move beyond 108.10 appears unlikely. The strong rise in USD was unexpected as it touched 107.84 before ending the day on a firm note at 107.77. The advance appears to have scope to extend higher even though a move beyond 108.10 appears unlikely (minor resistance is at 107.95). Support is at 107.45 followed by 107.20. The 107.08 low registered early yesterday is not expected to come into the picture.

1-3 WEEKS VIEW USD is expected to trade sideways but is likely to test the top of the expected range first. While we detected the slowdown in downward momentum yesterday and indicated that the “the odds for a sustained decline below 106.60 are not high”, the subsequent strong surge in USD that came within one pip of ‘key resistance’ at 107.85 came as a surprise (note that the 0.55% advance yesterday is the largest 1-day gain in more than 2 months). While the ‘key resistance’ is still intact, the price action is enough to indicate that the ‘negative phase’ that started more than 3 weeks ago (03 Jun, spot at 108.30) has finally ended. From here, USD is deemed to have moved into a ‘sideway-trading phase’ and is expected to trade within a broad 107.00/108.40 range in the coming days. That said, USD is likely to test the top of the expected range first.

Source:
UOB Research/Market Commentary

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