The US Dollar is gaining ground once again as markets calm after the sell-off. What levels should we watch?
Here is their view, courtesy of eFXdata:
EUR/USD: EUR is likely to trade sideways. No change in view from yesterday, see reproduced report below.
After the outsized decline last Friday (22 Mar), EUR traded in a relatively quiet manner yesterday and registered an ‘inside day’. As highlighted yesterday (25 Mar, spot at 1.1295), the recent price action wherein EUR failed to extend its decline after dropping sharply below 1.1200 earlier this month (low of 1.1174 on 07 Mar) and last Friday’s rapid and sharp drop (after rising strongly to 1.1448 on Wed, 20 Mar) have resulted in an unclear outlook. Indicators are mostly ‘flat’ which suggest EUR could be ‘caught’ between 1.1174 and 1.1448 for several weeks. From the perspective of 1 to 3 weeks, a 1.1220/1.1400 range is likely enough to contain the expected sideway trading in EUR.
GBP/USD: GBP is expected to trade sideways within a broad range.
There is not much to add to yesterday’s (26 Mar, spot at 1.3205) update as GBP traded sideways before ending the day little changed at 1.3205 (+0.05%). As highlighted, the recent choppy and rapid swings have resulted in a mixed outlook for GBP. While the bias is tilted to the upside, any GBP strength is expected to encounter solid resistance near 1.3400. All in, for the next several weeks, GBP could continue to trade in a choppy manner within a very broad range of 1.2950/1.3400. For the next one week or so, a 1.3050/1.3350 range may be enough to contain the price action in GBP.
AUD/USD: No clear direction, AUD is expected to trade sideways.
Despite two straight days of back-to-back strong gains, it is premature to expect the start of a directional move in AUD. For now, we continue to hold the view that there is no clear direction and AUD is trading sideways even though at a higher range of 0.7040/0.7190 (from 0.7000/0.7170 previously). Looking forward, the improved underlying tone suggests the risk for an ‘upside break’ is higher than downside but we are not anticipating a break of the major 0.7210 resistance anytime soon.
NZD/USD: Strong drop could test the early-March low of 0.6745.
The release of RBNZ statement earlier sent NZD plunging below our 0.6845 ‘key support’. The price action suggests that last Thursday (21 Mar) peak of 0.6938 is a short-term top and NZD is expected to trade below this level for the next couple of weeks. Despite the sharp and large decline, it is too soon to expect a sustained down-move. However, the strong downward pressure could lead to a test of the 0.6745 low registered earlier in March. At this stage, the prospect for a sustained decline below this level is not high (note that the Feb’s low of 0.6720 is another solid support). On the upside, ‘key resistance’ is at 0.6910 for now even though for the next few days, NZD is likely to stay below 0.6880.
USD/JPY: USD is still under pressure but expect solid support at 109.40.
While the surprisingly robust recovery in USD yesterday did not take out the 110.95 ‘key resistance’, the price action has dented the downward momentum. For now, we continue to hold the view that USD is “under pressure” even though the prospect for a test of the solid 109.40 support has diminished. In order to revive the flagging downward momentum, USD has to move and stay below 110.00 within these few days or a break of 110.95 would not be surprising and would indicate the start of a sideway-trading phase.
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