Another week draws to a close and the dollar is trying to find its feed. What’s next?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Immediate risk is on the upside but too soon to expect a sustained rise in EUR. EUR closed unchanged in NY (1.1334, 0.00%) and there is no change in view (see reproduced update below).
There is not much to add to the update from yesterday (21 Feb, spot at 1.1345). As highlighted, the immediate risk for EUR is on the upside but lackluster momentum suggests that it is too soon to expect a sustained rise. In other words, while we continue to see scope for EUR to move higher, we expect any advance to struggle to break above 1.1440. On a short-term basis, 1.1410 is already quite a strong level. On the downside, EUR has to move below 1.1270 in order to indicate that the current mild upward pressure has eased
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Outlook for GBP is positive but expect 1.3160 to offer solid resistance.
GBP traded in a quiet manner yesterday (within an ‘inside day) before ending the day slightly lower (NY close 1.3037, -0.10%). The price action is deemed as a short-term consolidation phase that could last for another 1 to 2 days. Looking ahead, as long as the ‘key support’ at 1.2960 remains intact, we continue to hold a positive view and see chance for GBP to extend its strong up-move from earlier this week. That said, we expect 1.3160 to offer solid resistance (in other words, the prospect for a break of this level is not high).
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Risk is on the downside but too early to expect a sustained decline in AUD.
We have held the same view since Monday (18 Feb, spot at 0.7140) wherein AUD is expected to “trade sideways to slightly higher in the coming days, likely between 0.7080 and 0.7200”. The volatile price action yesterday that resulted in AUD exceeding the expected 0.7080/0.7200 range within a single day was clearly unexpected (AUD popped to a high of 0.7208 during early-Asian hours before plummeting to hit 0.7070 during late-NY hours). While the subsequent weak closing in NY (0.7088, -1.04%) has shifted the immediate risk to the downside, it is too early to expect a sustained decline. All in, we expect AUD to stay under pressure in the coming days unless it can reclaim 0.7170. On the downside, a break of the 0.7054 low seen earlier this month would not be surprising but for now, the odds for a move below 0.7000 is deemed as low. Meanwhile, AUD could consolidate and trade sideways for the next few days.
NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD is expected to trade sideways.
We have held the same view since last Wednesday (13 Feb, spot at 0.6810) wherein the current movement in NZD is viewed as part of a broad sideway trading range between 0.6750 and 0.6900. When NZD rose to 0.6893 on Monday (18 Feb), we indicated that the ‘prospect for a break of 0.6900 is not high”. The relatively sharp drop of -0.77% yesterday (NY close of 0.6802) reinforces our view. After coming close to the top of the expected 0.6750/0.6900 range, NZD is likely ready to ‘test’ the bottom of the range at 0.6750 in the coming days. For now, we do not anticipate a sustained drop below this level.
USD/JPY: Neutral (since 09 Oct 18, 113.10): Diminished odds for further USD strength.No change in view.
While USD moved higher and closed on firm note in NY (110.85, +0.21%), there is no significant improvement in momentum. That said, we continue to hold the same view that there is room for further USD strength even though the odds are not high. Only a break of 110.25 would indicate that a short-term top is in place. Meanwhile, USD could continue to trade in a lackluster manner between 110.25 and last week’s 111.12 peak.
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