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The US Dollar emerges as the winner from the last week of September and Q3. What’s next?

Here is their view, courtesy of eFXdata:

EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR under pressure but major 1.1530 support could be out of reach.

We warned yesterday (27 Sep, spot at 1.1750) that the “odds for further EUR strength have diminished” and added “unless EUR can move and stay above 1.1800 within these 1 to 2 days, the risk will shift slowly to the downside and a break of the 1.1690 ‘key support’ would not be surprising”. EUR subsequently broke below 1.1690 during late Asian hours and plummeted to an overnight low of 1.1635. The break of the ‘key support’ indicates that the ‘positive’ phase in EUR that started two weeks ago (14 Sep, spot 1.1690) has ended. The 1.1815 high seen on Monday (14 Sep) is deemed as a short-term top and in view of the strong pick-up in downward momentum; the current weakness in EUR has room to extend lower in the coming days. While EUR is expected to stay under pressure in the coming days, it is premature to expect the start of a bearish phase. From here, we see scope for EUR to extend its decline but the major 1.1530 support could be outreach. On the upside, only a break of 1.1730 would indicate that the current soft patch in EUR has stabilized.

GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP has moved into a consolidation phase.

We highlighted yesterday (27 Sep, spot at 1.3175), “despite the rather sharp rebound from last Friday’s 1.3041 low, we continue to view the current price action as part of a consolidation phase”. The rapid retreat from Wednesday’s (26 Sep) peak of 1.3218 reinforces our current view that GBP is trading within a broad 1.3020/1.3220 consolidation range. From here, the immediate bias is for GBP to test the bottom of the expected range at 1.3020. After yesterday’s price action, downward momentum has picked up and the chance for a break below 1.3020 appears to be higher than ever. Looking further ahead, a clear break below 1.3020 would indicate GBP is ready to challenge the next support at 1.2940.

AUD/USD:  Neutral (since 13 Sep 18, spot at 0.7170): AUD is under pressure but 0.7140 is unlikely to yield so easily.

While we highlighted yesterday, “a break of 0.7220 is enough to indicate that the current upward pressure has eased”, the ease of which this strong support was taken out came as a surprise. From here, there is no change to the current neutral outlook but AUD is expected to stay under pressure in the coming days. That said, 0.7140 is a solid support and is unlikely to yield so easily. On the upside, the only break of 0.7260 would indicate that the current mild downward pressure has eased.

NZD/USD: Neutral (since 20 Aug 18, 0.6625): NZD has moved back into a consolidation phase.

We highlighted on Tuesday (25 Sep, spot at 0.6645), “the odds for further NZD strength have diminished” and added, “a break of the 0.6620 ‘key support’ would indicate that a short top is in place”. The ‘key support’ was taken out during NY hours as NZD dropped to a low of 0.6612. While last week’s 0.6699 top is deemed as a short-term top, the current outlook for NZD remains as neutral. NZD has likely moved into a consolidation phase and is expected to trade sideways within a 0.6560/0.6660 range in the coming days.

USD/JPY:  Neutral (since 23 Jul 18, 111.20): Shift to bullish if NY closing is above 113.75.

The ‘positive’ outlook for USD that started more than 2 weeks ago (see an update on 12 Sep, spot at 111.60) has kicked into a high gear as USD not only broke above the July’s peak of 113.15 but hit a fresh year-to-date (NY high of 113.46). While we indicated on Tuesday (25 Sep, spot at 112.80) that a break above 113.15 would not be surprising, the breach of the strong 113.45 resistance was not exactly expected. Most indicators are still pointing to a higher USD and from here, an NY closing above 113.75 would indicate the current ‘positive’ outlook has morphed into a bullish phase (immediate target would be at 114.70). On the downside, the key support is currently at 112.75, up from 112.15 previously.

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