Tensions are mounting ahead of the all-important US inflation report due later on. How are currencies positioned?
Here is their view, courtesy of eFXdata:
EUR/USD:
24-HOUR VIEW EUR is expected to trade sideways, likely within a 1.1280/1.1340 range. The strong and swift advance in EUR that touched 1.1347 last Friday appears to be running ahead of itself. For today, the risk of EUR moving above the 1.1347 is not high. That said, EUR does not appear to be ready to stage a significant pull-back just yet. All in, EUR is more likely to trade sideways to slightly lower. Expected range for today, 1.1280/1.1340.
1-3 WEEKS VIEW ‘Positive phase’ in EUR is still intact, a test of 1.1380 would not be surprising. In our last update on 04 Jun (spot at 1.1245), we held the view that EUR has “moved into a ‘positive phase'” and “could move to 1.1300″. We added, the prospect for EUR strength to extend to 1.1380 is not high. EUR closed below 1.1300 on Wednesday and Thursday before surging higher on Friday (07 Jun) and hit 1.1347 (on a weekly basis, EUR gained +1.47%, the largest 1-week advance since Aug 2018). While the price action continues to suggest further EUR strength, upward momentum has not improved by as much as preferred. That said, a test of 1.1380 would not be surprising but whether EUR can maintain toehold above this level is left to be seen. All in, the ‘positive phase’ could last for a while more and only a break of 1.1230 (‘key support’ previously at 1.1155) would indicate that a short-term top is in place.
GBP/USD:
24-HOUR VIEW GBP could edge lower to 1.2685 but a sustained decline is not expected. The rapid pull-back from last Friday 1.2763 peak occurred amidst overbought conditions and waning momentum. In other words, 1.2763 could be a short-term top. From here, barring a move above 1.2763, GBP could edge lower to 1.2685. At this stage, a sustained decline below 1.2685 is not expected.
1-3 WEEKS VIEW GBP is expected to trade sideways. GBP touched 1.2763 last Friday (07 Jun), not far from the top of our expected sideway-trading range of 1.2570/1.2770 (see update from last Tuesday, 04 Jun). The advance lacks momentum and this coupled with the pull-back from 1.2763 suggests that GBP is likely to continue to trade sideways. In other words, GBP is still in a ‘sideway-trading’ phase. Looking ahead, the ‘sideway-trading’ phase appears more likely to be resolved by a move above the top of the expected range.
AUD/USD:
24-HOUR VIEW Scope for AUD to retest 0.7025 before a pull-back can be expected. While the strong gains in AUD last Friday that touched 0.7022 appears to be running ahead of itself, there is scope for AUD to retest the 0.7025 level before a more significant pull-back can be expected. Only a move below 0.6975 would indicate that a short-term top is in place. The next support at 0.6960 is unlikely to come into the picture.
1-3 WEEKS VIEW Upward momentum is still slightly positive; AUD could grind higher to 0.7050. In our last update on 04 Jun (spot at 0.6965), we expected AUD to “trade with an upside bias towards 0.7010″. While AUD exceed this level last Friday (07 Jun) with a high of 0.7022, upward momentum has not improved by much and the risk of a sustained advance in AUD is not high. That said, upward momentum is still slightly positive and only a move below 0.6920 would indicate that the current mild upward pressure has eased. Meanwhile, AUD could grind higher to 0.7050.
NZD/USD:
24-HOUR VIEW NZD is likely to consolidate its gains and trade sideways at these higher levels, expected to be between 0.6630 and 0.6680. The strong rally in NZD that hit 0.6681 last Friday has moved deep into overbought territory. While further NZD strength is not ruled out in the days ahead, further intraday strength appears unlikely. NZD is more likely to consolidate its gains and trade sideways at these higher levels, likely between 0.6630 and 0.6680.
1-3 WEEKS VIEW ‘Positive phase’ is still intact but overbought conditions could limit gains to 0.6700. In our update on 04 Jun (spot at 0.6585), we ‘upgraded’ our view for NZD from ‘sideway-trading phase’ to a ‘positive phase’. We indicated that NZD “could move to 0.6635″. The subsequent advance exceeded our expectation as NZD hit a high of 0.6681 last Friday (07 Jun). While the ‘positive phase’ is still intact, overbought conditions suggest any further gains would likely be at a slower pace and could be limited to a test of 0.6700. All in, only a break of 0.6600 (‘key support’ previously at 0.6520) would indicate that the ‘positive phase’ has run its course.
USD/JPY:
24-HOUR VIEW Further USD strength is not ruled but is likely limited to a test of 108.95. USD gapped higher upon opening this morning. Further USD strength is not ruled out but for today, any up-move is likely limited to a test of 108.95 (minor resistance is at 108.75). Support is at 108.15 followed by last Friday’s low near 107.85.
1-3 WEEKS VIEW Diminished odds for further USD weakness. Our view for USD to “extend its weakness” did not really materialize (see update on 03 Jun, spot at 108.30) as it traded sideways for most of last week. Downward momentum has eased considerably and while the current ‘negative phase’ in USD is still intact, the odds for further weakness have diminished. However, only a break of 109.30 (no change in ‘key resistance’ level) would indicate that the end of the ‘positive phase’ and the start of a ‘sideway-trading phase’.
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