Tension is mounting ahead of the Fed and as trade talks were dampened by the Huawei indictments.
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Room for EUR to test 1.1490.
There is not much to add to the update from yesterday (28 Jan, spot at 1.1410). As highlighted, while further EUR strength is not ruled out, we have doubts about the sustainability of the current advance. However, there is room for a test of the 1.1490 resistance but only a daily closing above this level would indicate that EUR is ready to challenge the month-to-date high at 1.1570. Overall, we hold a ‘mildly positive’ view on EUR and 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. No change in view.
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.
There is not much to add to the update from yesterday. As highlighted, after the strong surge last Friday, the risk is clearly on the upside. However, we detect a solid resistance zone at 0.7235/50 and AUD may find it difficult to break above these levels. 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 scope to move above 0.6880. No change in view.
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): USD is expected to trade sideways.
We have held the same view since last Monday (21 Jan, spot at 109.75) wherein there is “scope for USD to test 110.00″. USD touched 109.99 on 23 Jan but has since traded mostly sideways. The lackluster price action has resulted in a loss in momentum and from here, USD is unlikely to test 110.00, at least not for the next one week or so. Instead, the weakened underlying tone suggests USD could trade sideways to slightly lower, likely between 108.60 and 109.70.
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