Markets are soggy as the US-Sino trade tensions persist. The greenback is gaining ground while the rest retreat. What levels should we watch?
EUR/USD:
24-HOUR VIEW: Soft underlying tone could lead to a lower EUR but 1.1130 is unlikely to challenged. Instead of trading sideways, EUR dropped to 1.1157 before closing on a soft note at 1.1160. The soft underlying tone could result in a lower EUR for today but lackluster momentum suggests that the 1.1130 support is unlikely to be challenged (next support is at 1.1100). On the upside, only a move above 1.1205 would indicate that the current soft patch in EUR has stabilized (minor resistance is at 1.1185).
1-3 WEEKS VIEW: EUR is likely to trade sideways. We indicated on Monday (27 May) that “if EUR were to close above the top our expected 1.1130/1.1230 range, it would suggest the start of a stronger and more sustained recovery”. However, EUR dipped below the short-term support of 1.1160 yesterday (low of 1.1157) and the mild upward pressure has eased. In other words, the current ‘sideway-trading phase’ remains intact and EUR is expected to continue to trade between 1.1130 and 1.1230. Looking ahead, EUR has to move clearly out the month-to-date range of 1.1105/1.1265 in order to indicate that it is ready for a more sustained directional move. Until then, the recent lackluster price actions could persist for a while more.
GBP/USD:
24-HOUR VIEW: Underlying tone remains soft but GBP is not expected to challenge the 1.2600 support. We highlighted yesterday GBP “could edge lower but any weakness is viewed as part of a 1.2640/1.2720 range”. However, GBP traded in a subdued manner between 1.2651 and 1.2701. Despite the quiet price action, the underlying tone remains soft and for today, a dip below 1.2640 would not be surprising. That said, lackluster momentum suggests that any weakness is unlikely to be sustained (the next support at 1.2600 is not expected to come into the picture). Resistance is at 1.2690 followed by 1.2720.
1-3 WEEKS VIEW: Short-term bottom in place, GBP is expected to trade sideways. No change in view from yesterday, see reproduced update below. There is not much to add to the update from yesterday (27 May, spot at 1.2725) as GBP touched 1.2754 before easing off. As indicated, last week’s 1.2605 low is deemed as a “short-term bottom” and GBP is expected to trade above this level for a couple of weeks. A stronger recovery is not ruled out but for now, any GBP strength is viewed as part of a 1.2640/1.2850 sideway-trading range. Looking ahead, only a daily closing below 1.2600 would suggest GBP has moved into a fresh ‘negative phase’ instead of unwinding its current oversold conditions. Conversely, a move above 1.2900 would indicate that 1.2605 is a more significant bottom than currently expected.
AUD/USD:
24-HOUR VIEW: AUD is expected to trade sideways, likely within a 0.6910/0.6940 range. While AUD traded sideways as expected, the registered range of 0.6917/0.6935 was narrower than our anticipated range of 0.6900/0.6935. The quiet price action offers no fresh clue and AUD is expected to continue to trade sideways for now, albeit likely at a slightly higher range of 0.6910/0.6940.
1-3 WEEKS VIEW: Short-term bottom in place, AUD is expected to trade sideways. AUD traded in a tight 19 pips range between 0.6917 and 0.6936 yesterday (28 May) before ending little changed at 0.6922 (+0.07%). The quiet price action reinforces our current view wherein last week’s 0.6865 is a “short-term bottom” and AUD is in “sideway-trading phase”. For now, the 0.6860/0.6985 range indicated on Monday (27 May) is expected to be enough to contain the movement in AUD for a couple of weeks. Looking ahead, the ‘sideway-trading phase’ is more likely to be resolved with the start of fresh ‘negative phase’ but this is only upon a clear break of 0.6860.
NZD/USD:
24-HOUR VIEW: NZD is expected to trade sideways between 0.6530 and 0.6560. Expectation for NZD to “drift lower to 0.6525″ did not materialize as it traded in a tight 17 pips range between 0.6540 and 0.6557. Most indicators are at ‘neutral’ level now and NZD is expected to continue to trade sideways, likely between 0.6530 and 0.6560.
1-3 WEEKS VIEW: Short-term bottom is in place; NZD is expected to trade sideways. There is not much add as NZD traded in a tight range yesterday (28 May). The narrative from Monday (27 May) wherein NZD has moved into a ‘sideway-trading phase’ is still clearly intact. In other words, we continue to expect NZD trade sideways even though as indicated on Monday, the immediate bias is tilted to the upside any NZD is strength is viewed as part of a 0.6500/0.6610 range.
USD/JPY:
24-HOUR VIEW: Downward momentum has picked up but a break of 109.00 is not expected. USD traded sideways between 109.20 and 109.60, a lower range than our expected 109.30/109.70. Downward momentum has picked up but at this stage, a break of the strong 109.00 support is not expected. Resistance is at 109.60 but the stronger is at 109.90.
1-3 WEEKS VIEW: USD has moved into a sideways-trading phase. No change in view from yesterday, see reproduced update below. USD rebounded after touching 109.27 yesterday even though the recovery lacks momentum. For now, we continue to hold the same view as from last Tuesday (21 May, spot at 110.05) wherein USD is in a “sideway-trading phase”. However, the underlying tone has weakened over the past couple of days and the current consolidation could be resolved with a downside break. That said, USD has to register a close below 109.00 in NY in order to indicate the start of a ‘negative phase’. Meanwhile, USD could continue to trade sideways albeit at a lower range of 109.00/110.30 (instead of the 109.40/110.80 expected previously).
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