Markets tumbled down after China announced countermeasures in the trade war with the US. What levels should we watch?
Here is their view, courtesy of eFXdata:
EUR/USD:
24-HOUR VIEW: Intraday risk is tilted to the downside but expect strong support at 1.1205. EUR traded between 1.1220 and 1.1265 yesterday, close to our expected sideway trading range of 1.1215/1.1265. The rapid set-back from 1.1265 has weakened the underlying tone and the intraday risk is tilted to the downside. That said, any weakness is expected to face solid support at 1.1205 (there is another strong level at 1.1185). Yesterday’s high of 1.1265 is unlikely to be challenged for today (minor resistance is at 1.1245).
1-3 WEEKS VIEW: EUR is expected to trade sideways but risk of a break of 1.1265 has increased. No change in view from yesterday (13 May), see reproduced update below. Note that EUR tested 1.1265 for the second time but eased off and ended lower. EUR has to move above 1.1265 within these 1 to 2 days or the prospect for such a move would diminish quickly.
EUR touched 1.1253 last Friday before easing off to end the day slightly higher (NY close of 1.1233, +0.11%). The price action offers no fresh clue and we continue to hold the same view from earlier this month (see update of 02 May, spot at 1.1200) wherein EUR is expected “to trade sideways”. That said, as highlighted last Friday (10 May), the underlying tone has improved slightly and the risk for a break above the top of the expected 1.1110/1.1265 range has increased. Overall, the build-up in momentum is expected to gain steam if EUR can continue to register a higher daily closing from here. On the downside, a move below 1.1185 would indicate that the current nascent build-up in upward momentum has fizzled out. Looking ahead, if there were a daily closing above 1.1265, it would indicate that EUR is ready to move towards 1.1325.
GBP/USD:
24-HOUR VIEW: GBP could dip below 1.2930 but next support at 1.2900 could be just out of reach. Expectation for GBP to trade sideways yesterday was incorrect as it reversed quickly after touching 1.3040. While the sharp and swift drop to an overnight low of 1.2942 appears to be running ahead of itself, the weakness is not showing sign of stabilizing. From here, barring a move above 1.3000 (minor resistance at 1.2980), GBP could dip below the 1.2930 support. That said, the next support at 1.2900 could be just out of reach for now.
1-3 WEEKS VIEW: GBP has moved into a sideway-trading phase. GBP dropped to 1.2942 during NY hours, the low is not far above the bottom of our expected 1.2930/1.3110 sideway trading range. As highlighted last Thursday (09 May, spot at 1.3010), “the risk of a break of the bottom of the expected range appears to be a tad higher”. However, at this stage, the odds for GBP to move below last month low near 1.2865 are still not high. For now, we continue to hold the view that GBP is in a sideway-trading phase but the overnight price action acts as an early indication that GBP is ready to move into a negative phase (confirmation is upon a clear break below 1.2930).
AUD/USD:
24-HOUR VIEW: Vastly improved downward momentum suggests AUD could weaken further but 0.6910 could be just out of reach for now. The anticipated weakness in AUD exceeded our expectation as it not only cracked 0.6970 but also the strong level of 0.6950 (overnight low of 0.6941). The vastly improved downward momentum suggests AUD could weaken further even though the next support at 0.6910 could be just out of reach for now. On the upside, 0.6980 is expected to be ‘safe’ for today (minor resistance is at 0.6965).
1-3 WEEKS VIEW: Focus is at 0.6910. We have held the same view since last Monday (06 May, spot at 0.6980) wherein a “break of 0.6950 would shift focus to 0.6910″. After about a week, AUD finally cracked 0.6950, albeit not by much (low of 0.6941). The price action is not surprising as we indicated yesterday (13 May) that “the current short-term sideway trading phase is likely to be resolved by a ‘downside break'”. As per our narrative, the level to focus on now is at 0.6910. The level is followed by a rather critical level at 0.6885. A break of 0.6885 would greatly increase the risk of AUD accelerating lower in the weeks ahead. On the upside, the ‘key resistance’ has finally moved from its previous level of 0.7060 to 0.7010. Only a break of the 0.7010 ‘key resistance’ would indicate that the current AUD weakness has run its course (note the current negative started in late April).
NZD/USD:
24-HOUR VIEW: NZD could edge lower to 0.6545. We expected NZD to trade between 0.6570 and 0.6610 yesterday but it drifted to a low of 0.6564 before ending the day on a weak note (NY close of 0.6569). While downward momentum has not improved by much, the weak underlying tone suggests NZD could continue to edge lower to the next support at 0.6545. For today, a break of the post-RBNZ low of 0.6525 would come as a surprise. Resistance is at 0.6590 followed by 0.6610. The latter level is acting as a solid resistance now.
1-3 WEEKS VIEW: NZD is expected to test the rising weekly trend-line at 0.6500. No change in view from yesterday, see reproduced update below. After crashing to a low of 0.6525 last Wednesday (08 May), NZD has traded in a relatively subdued manner. The quiet price action has dented the downward momentum and the prospect for further NZD weakness has diminished. However, as long as the 0.6630 ‘key resistance’ is intact (no change in level of ‘key resistance), we continue to see chance for NZD to “test the rising weekly trend-line at 0.6500″. That said, NZD has to move and stay below 0.6570 within these few days or the downside risk would diminish further.
USD/JPY:
24-HOUR VIEW: USD could dip below but is unlikely to challenge the next support at 108.70. The sudden lurch lower in USD came a surprise as it cracked the strong 109.30 support and came close to taking out the next support at 109.00 (overnight low of 109.01). Despite the bounce from the low, it is too soon to expect a recovery. However, the ‘hesitant’ downward momentum suggests while USD could dip below 109.00, it is unlikely to challenge the next support at 108.70. Resistance is at 109.50 but the stronger level is closer to 109.85.
1-3 WEEKS VIEW: Risk of a clear break of 109.00 has increased. The negative phase in USD that started last Monday (06 May, spot at 110.65) is not only intact but has notched up a gear as USD easily cracked 109.30 and came close to 109.00 (low of 109.01 during NY hours). The rapid pace of decline suggests risk of a clear break of 109.00 has increased. However, shorter-term indicators are rather oversold and this could lead to a couple of days of consolidation first. For now, the prospect for further USD weakness is not that high but it would continue to increase as long as the ‘key resistance’ at 110.10 is intact (level was at 110.40 previously).
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