EUR/USD: Neutral (since 21 Aug 18, 1.1485): Rebound in EUR could extend further to 1.1500.
We indicated early last Friday (16 Nov, spot at 1.1330) “downward pressure has eased” and EUR has “found a short-term bottom near 1.1215”. We expected “1.1215 to stay intact for the next one week or so” and also expected “EUR to trade sideways albeit with a positive bias within a 1.1240/1.1430 range”. What we did not expect was the strong and rapid surge in EUR during NY hours (closed at 1.1418, +0.81%). While Friday’s peak of 1.1421 was below the top of the expected 1.1240/1.1430 range at 1.1430, the price action suggests the current rebound in EUR could extend further to 1.1500 (high seen earlier this month). This is a rather strong resistance and at this stage, the prospect for a clear break above this level is not high. All in, we hold a ‘positive’ EUR view from here until there is a break of the ‘key support’ 1.1310.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Prospect of a fresh low for the year has increased. No change in view.
Volatility remains at an elevated level and the whippy price actions over the past few days offer no strong clues on the direction of the next directional move. However, the outsized decline of -1.59% yesterday (NY close of 1.2775) does suggest that the risk of a break of the 1.2662 year-to-date low has increased. All in, we expect GBP to stay pressure in the coming days unless it can move and stay above the 1.2980. Looking ahead, a break of the year-to-date low could lead to acceleration lower towards the next support at 1.2590.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Next level to focus on is at 0.7380.
The 0.7315 level that first highlighted more than a week ago (see update on 08 Nov, spot at 0.7275) was finally exceeded as AUD hit a high of 0.7338 last Friday (16 Nov). While we still prefer upward momentum to be more ‘impulsive’, the break of 0.7315 has shifted the focus to the next major resistance at 0.7380 (with a relatively strong ‘intervening’ resistance at 0.7355). On the downside, the ‘key support has moved sharply higher to 0.7220 from 0.7150 previously. On a shorter-term note, 0.7250 is already a strong support level.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Expect further NZD strength to 0.6900.
We indicated last Friday (16 Nov, spot at 0.6825) a “NY closing above 0.6850 would suggest further NZD strength to 0.6900”. NZD subsequently staged a surprisingly strong rise before closing at 0.6879 in NY (well above the 0.6850 level). From here, the focus is at 0.6900 and break of this level would indicate that NZD has found a mid to long-term bottom at 0.6424 last month. In other words, a break of 0.6900 would suggest the 0.6424 low would likely remain intact in the coming weeks, possibly months. Meanwhile, only a move below 0.6800 (‘key support’ previously at 0.6750) would suggest that an interim top is in place.
USD/JPY: Neutral (since 09 Oct 18, 113.10): Chance for USD to weaken further to 112.00.
We highlighted last Friday (16 Nov, spot at 113.55) “USD is to trade sideways with a downward bias”. However, the subsequent large decline of -0.70% (NY close of 112.82) is certainly more than a ‘downward bias’. The price action has resulted in a rapid increase in downward momentum and from here; we see chance for USD to weaken further to 112.00. Only a move back above the ‘key resistance’ at 113.60 would indicate that the downward pressure has eased.