Currencies are looking for new directions in the wake of a busy week that includes the Fed and the NFP. What technical levels should we view?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Room for EUR to test 1.1490.
After plunging sharply last Thursday (24 Jan) and breaking several strong support levels with ease, the abrupt and strong reversal on Friday (25 Jan) came as a surprise (EUR posted a huge gain of +0.95% on Friday, the largest 1-day advance in 7 months). The break of the 1.1400 ‘key resistance’ indicates that the recent downward pressure has eased. While further EUR strength in the coming days is not ruled out, we have doubts about the sustainability of the current advance. Overall, there is room for EUR to test 1.1490 but it has to close clearly above this level in order to indicate that it has enough momentum to challenge the month-to-date high at 1.1570. To put it another way, the outlook for EUR is deemed as ‘mildly positive’. On the downside, only a move below 1.1330 would indicate the current upward pressure has eased.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Focus is at 1.3260 but this level may not come into the picture so soon.
We highlighted last Friday (25 Jan, spot at 1.3100) “1.3175 appears to be within reach”. We added, “a clear break of this level would shift the focus to the next resistance at 1.3260″. GBP subsequently surged past 1.3175 as it hit a high of 1.3218 during NY hours on Friday. From a short-term perspective, the advance is severely over-extended and while the focus remains at 1.3260, this level may not come into the picture so soon. That said, a clear break of this level would greatly increase the risk of a move beyond last September’s peak at 1.3295. On the downside, the ‘key support’ has moved higher to 1.3060 from 1.3000 last on Friday. Only a break of the key support would indicate that a short-term top is in place
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Risk is on the upside but AUD may struggle to break the 0.7235/50 resistance zone.
Despite the relatively deep pull-back in AUD from the 11 Jan high of 0.7235, we indicated last Friday (25 Jan, spot at 0.7090) “only a NY closing below 0.7060 would suggest AUD is ready to probe the 0.7000 support”. AUD dropped to 0.7076 on Friday before staging a surprisingly strong rally and closed higher by a whopping +1.25%. From here, the risk is clearly on the upside but the levels between 0.7235 and 0.7250 are strong resistances and AUD may find it difficult to break above this solid resistance zone. All in, we expect the current upward pressure to persist unless AUD drops back below 0.7090.
NZD/USD: Neutral (since 07 Dec 18, 0.6880): Rally in NZD has cope to move above 0.6880.
We have held the same view since last Wednesday (23 Jan, spot at 0.6745), wherein “the bias for the coming week is tilted to the upside but at this stage, a clear break of 0.6830 would come as a surprise”. While the ‘key support’ for our mildly positive NZD view at 0.6735 (low of 0.6747 on Friday) remains intact, the sudden acceleration higher last Friday that not only surged past 0.6830 with ease but also moved above the next strong resistance at 0.6850 came as a surprise. The strong rally has scope to move above 0.6880 but at this stage, the prospect for a break of 0.6910 is not high. Only a break of the ‘key support’ (currently at 0.6760) would indicate that a short term top is in place.
USD/JPY: Neutral (since 09 Oct 18, 113.10): Scope for USD to test 110.00. No change in view.
We have held the same view since Monday (21 Jan, spot at 109.75) wherein there is “scope for USD to test 110.00″. After ‘dithering’ for a couple of days, USD touched 109.99 during NY hours before easing off quickly. As highlighted yesterday, while upward momentum is not strong, a move above 110.00 would not be surprising but the prospect for a sustained move beyond 110.40 is not high. We continue to hold the same view and only a move below 108.90 would indicate that a short-term top is in place.
For lots more FX trades from major banks, sign up to eFXplus
By signing up for eFXplus via the link above, you are directly supporting Forex Crunch.
Share
