Markets seem concerned about global growth and the US dollar has gained ground. What technical levels should we watch?
Here is their view, courtesy of eFXdata:
EUR/USD:
24-HOUR VIEW Underlying tone appears soft, EUR likely to trade at a lower range of 1.1260/1.1315. Expectation for EUR to drop “a little further to 1.1255″ did not materialize as it traded between 1.1273 and 1.1319 before ending the day little changed at 1.1283 (-0.02%). The underlying tone still appears to be on the soft side even though any weakness is viewed as a lower trading range of 1.1260/1.1315 (a sustained decline below 1.1260 is not expected).
1-3 WEEKS VIEW EUR is in a sideway-trading phase. There is not much to add to the update from yesterday. As indicated, last week’s 1.1412 high is deemed as a short-term top and EUR has likely moved into a ‘sideway-trading phase’ and is expected to trade within a relatively broad range of 1.1200/1.1370. Near-term, the bias is tilted to the downside but in view of the lackluster momentum, any weakness is unlikely to move clearly below 1.1200. Looking ahead, if EUR were to continue to trade around current levels, the expected range would narrow in the coming days.
GBP/USD:
24-HOUR VIEW GBP could dip below 1.2570 but 1.2540 is likely out of reach. We expected GBP to “drift lower to 1.2605″ yesterday. GBP initially touched 1.2606 and recovered but Carney’s comments sent it plummeting to a low of 1.2584. Downward momentum has picked up albeit not by much and from here, GBP could dip below the strong 1.2570 support. For today, the next support at 1.2540 could be out of reach. Resistance is at 1.2620 but only a move above 1.2645 would indicate the current downward pressure has eased.
1-3 WEEKS VIEW GBP is in a sideway-trading phase, likely to probe bottom of range first. We indicated yesterday (02 Jul, spot at 1.2645) that GBP has moved into a ‘sideway-trading phase’ even though the weakened underlying tone suggests it would likely “probe the bottom” of the expected 1.2570/1.2725 range first. However, the pace of which GBP moved towards the bottom of the range was faster than anticipated as it plummeted to an overnight low of 1.2584. From here, if GBP were to close below 1.2570 in NY, it would suggest the June’s low of 1.2507 would come under pressure. As downward momentum has not improved by all that much, the prospect for such a scenario is not high for now but it would continue to increase unless GBP can move back above the strong resistance at 1.2670 within these few days.
AUD/USD:
24-HOUR VIEW AUD is expected to trade sideways, likely within a 0.6975/0.7010 range. Expectation for AUD to “test 0.6935 first” was incorrect as it rebounded after briefly touching 0.6957. Downward pressure has waned and the current movement is viewed as part of a consolidation phase. In other words, AUD is expected to trade sideways, likely between 0.6975 and 0.7010.
1-3 WEEKS VIEW AUD is in a sideway-trading phase. No change in view from yesterday, see reproduced update below.
Despite the break of 0.7025 during early Sydney hours yesterday (01 Jul, spot at 0.7025), we held the view “only a NY closing above 0.7025 indicate the start of a ‘positive’ phase”. We added, “the prospect for AUD to close above 0.7025 is not very high”. However, the subsequent swift and sharp decline that moved below the 0.6960 ‘key support’ was not exactly expected (overnight low of 0.6956). Upward momentum has dissipated and yesterday’s high of 0.7039 is the extent of the AUD strength that started more than a week ago (see annotations in chart below). From here, AUD is deemed to have moved into a ‘sideway-trading phase’ and is expected to trade within a relatively broad range of 0.6900/0.7010.
NZD/USD:
24-HOUR VIEW NZD is likely to trade at a slightly higher trading range of 0.6660/0.6690. Instead of “testing 0.6645″, NZD traded in a quiet manner between 0.6657 and 0.6681. The underlying tone has improved a tad and this could lead to a slightly higher trading range of 0.6660/0.6690.
1-3 WEEKS VIEW NZD is expected to trade sideways. No change in view from yesterday, see reproduced update below.
We indicated yesterday (01 Jul, spot at 0.6720), “despite the relatively strong gains, upward momentum has not improved by much and the odds for NZD to extend its advance to 0.6760 are not high” and added, “only a NY close above 0.6720 would indicate further NZD strength to 0.6760″. However, the subsequent swift and sharp drop to an overnight low of 0.6665 was not exactly expected. While the 0.6660 ‘key support’ is still intact, the price action is enough to indicate that the early Sydney hours high of 0.6737 yesterday is a shortterm top. From here, NZD is deemed to have moved into a ‘sideway-trading phase’ and is expected to trade within a relatively broad 0.6610/0.6730 range.
USD/JPY:
24-HOUR VIEW Rapid decline in USD could extend lower but 107.50 is expected to offer solid support. The sudden reversal of Monday’s strong gains came as a surprise as USD plummeted to a low of 107.75 (from a high of 108.47 during early Asian hours). The relatively sharp and rapid decline could extend further even though 107.50 is expected to offer solid support (next support is at 107.20). On the upside, 108.30 is expected to be strong enough to cap any intraday recovery (108.15 is a minor resistance).
1-3 WEEKS VIEW USD is expected to sideways but likely to test the bottom of range first. Our view that USD has moved into a ‘positive phase’ yesterday (02 Jul, spot at 108.35) was ill-timed and incorrect as USD surrendered all of the strong gains made on Monday (01 Jul) and plummeted to 107.75. The low is just above our 107.65 ‘key support’ but the subsequent weak daily closing in NY (107.88, -0.50%) is enough to indicate that our expectation for a stronger USD was premature. From here, we view the current movement as part of ‘sideway-trading phase’ even though the weakened underlying tone suggests USD would likely test the bottom of the expected 107.00/108.30 range first.
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