A new year begins with fresh USD and JPY strength. What’s next?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Further up-move seems likely but EUR may struggle to maintain a toehold above 1.1500.
While EUR traded within a relatively narrow 179 pips since late November (between 1.1266 and 1.1485), it closed on a firm note the past couple of trading days. We expect further up-move in the coming weeks even though lackluster upward momentum suggests EUR could struggle to maintain a toehold above the major 1.1500 resistance. Support is at 1.1420 but only a move below 1.1390 would indicate that the current mild upward pressure has eased.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): The recovery phase in GBP has scope to strengthen to 1.2850.
After dropping to a low of 1.2477 in early-December, GBP rebounded strongly and ended the month largely unchanged from November (31 Dec close of 1.2753, -0.03% lower than Nov). The price action is viewed as part of an on-going recovery phase and there is scope for GBP to strengthen further to 1.2850. At this stage, a sustained break above this level is not expected. All in, only a move below the 1.2660 ‘key support’ would indicate the current upward pressure in GBP has eased.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD is in a consolidation phase and is expected to trade sideways.
AUD dropped sharply in the last 2 weeks of last year and hit a low of 0.7017. However, the rapid decline appears to have stabilized and further sustained down-move is not expected. That said, a dip below the ‘round-number’ support of 0.7000 is not ruled but at this stage, any weakness is viewed as part of a 0.6975/0.7110 consolidation phase.
NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD is trading in a consolidation phase.
After dropping sharply in the last two weeks of December, the decline in NZD appears to have stabilized. The current movement is viewed as part of a consolidation phase. In other words, NZD is expected to trade sideways from here, likely within a 0.6670/0.6780 range.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD is still under pressure and could test 109.00.
The sharp drop in USD that started in mid-December appears to be running too fast, too soon. However, the weakness is not showing sign of stabilizing and the immediate pressure is still on the downside. Only a move above 110.60 would indicate that the current weakness has stabilized. Until then, we expect USD to stay under pressure and a test of the major 109.00 support would not be surprising.
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