Currencies have consolidated previous moves and are looking for a new direction. What’s next?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR could continue to weaken towards the 2018 low near 1.1215.
There in not much to add as EUR advanced to a high of 1.1334 yesterday (18 Feb), not too far from our 1.1350 ‘key resistance’. As highlighted, only a move above 1.1350 would suggest that a short a short-term bottom in place. Until then, another attempt to move to the 2018 low near 1.1215 is not ruled out. That said, in order to rejuvenate the currently rapidly waning momentum, EUR has to move and stay below 1.1280 within these 1 to 2 days or a break of the ‘key resistance’ would not be surprising.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Weakness has stabilized, GBP to trade sideways for now. No change in view.
After declining sharply for two straight days on Wed and Thu, the sudden and strong reversal in GBP last Fri came as a surprise (NY close of 1.2894, +0.73%). The breach of the 1.2900 ‘key resistance’ earlier this morning (high of 1.2897 on Friday) indicates that the recent weakness in GBP has stabilized. While GBP could trade at higher levels in the coming days, it is premature to expect a sustained up-move. From here, we expect GBP to trade sideways, likely within a relatively broad range of 1.2800/1.3050.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Downward pressure has eased, AUD likely to trade sideways.
AUD tested the strong 0.7160 resistance but failed to break through (high of 0.7160). As highlighted yesterday (18 Feb, spot at 0.7140), while the strong 0.7160 resistance is still intact, the recent downward pressure has eased and last week’s 0.7054 low is deemed as a short-term bottom. That said, it is too early to expect a sustained up-move. AUD is more likely to trade sideways to slightly higher in the coming days, likely between 0.7080 and 0.7200.
NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD is expected to trade sideways. NZD rose to a 2-week high of 0.6893 before easing off quickly.
The high was not far from the top of our expected 0.6750/0.6900 range that we first indicated last Wed (13 Feb, spot at 0.6810). Despite the ‘positive’ price action over the past few days, we continue to view the movement in NZD as part of a broad sideway trading range. Only an unlikely break of 0.6900 would indicate that NZD is ready to tackle the 0.6942 peak registered earlier this month. At this stage, the prospect for such a move is not high.
USD/JPY: Neutral (since 09 Oct 18, 113.10): Diminished odds for further USD strength.
The muted price action in USD yesterday (18 Feb) offers no fresh clues. For now, we continue to hold the view that there is scope for further USD strength. However, as highlighted last Friday (15 Feb, spot at 110.55), after the rapid set-back from the 111.12 high, the odds for further USD strength have diminished. That said, only a break of 110.25 would confirm that a short-term top is in place. Meanwhile, in order to rejuvenate the current flagging momentum, USD has to move and stay above 110.80 soon or a break of 110.25 would not be surprising.
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