The risk-off atmosphere boosts the Japanese yen but seems to have a limited effect on other major currencies. What’s next?
Here is their view, courtesy of eFXdata:
EUR/USD:
24-HOUR VIEW: EUR is expected to trade sideways, likely between 1.1170 and 1.1215. EUR traded sideways and registered a range of 1.1181/1.1214 yesterday, narrower than our expected 1.1165/1.1215 range. The muted price action has resulted in most indicators turning ‘flat’ and further sideway trading appears likely. Expected range for today; 1.1170/1.1215.
1-3 WEEKS VIEW: EUR is expected to trade sideways. After EUR dropped from a high of 1.1265, we indicated last Thursday (02 May, spot at 1.1200) that EUR has likely moved into a consolidation phase and is “expected to trade sideways”, likely between the two strong levels of 1.1110 and 1.1265. The price action for the past week is in line with our expectation as EUR traded in a subdued manner. There is no further clue for now and we continue to hold the same view. As highlighted before, there is no early indication on which level is more ‘vulnerable’.
GBP/USD:
24-HOUR VIEW: GBP is expected to consolidate its loss and trade sideways, likely within a 1.2980/1.3060 range. Expectation for GBP to “test 1.3040 first before recovering” was incorrect as it plummeted to an overnight low of 1.2987. While the sharp drop appears to be running ahead of itself, it is too soon to expect a recovery. From here, GBP is more likely to consolidate its loss and trade sideways at these lower levels, expected to be within a 1.2980/1.3060 range.
1-3 WEEKS VIEW: GBP has moved into a sideway-trading phase. We highlighted yesterday that “upward momentum is beginning to wane and GBP has to move and stay above 1.3130 within these few days or a break of the 1.3035 ‘key support’ would not be surprising”. GBP subsequently cracked 1.3035 and dropped to an overnight low of 1.2987. As highlighted yesterday, a break of the ‘key support’ would indicate that GBP has moved into a sideway-trading phase. In other words, GBP is expected to trade sideways from here, likely within a 1.2930/1.3110 range.
AUD/USD:
24-HOUR VIEW: AUD is expected to drift lower but a break of 0.6960 appears unlikely. AUD traded between 0.6986 and 0.7027 yesterday, relatively close to our expected 0.6990/0.7035 range. The subsequent soft daily closing of 0.6989 in NY has weakened the underlying tone. From here, AUD is expected to drift lower even though a break of the 0.6960 low seen earlier this week is unlikely (minor support is at 0.6975). On the upside, resistance is at 0.7015 followed by 0.7030.
1-3 WEEKS VIEW: Break of 0.6950 would shift focus to 0.6910. No change in view from yesterday, see reproduced update below. Post-RBA announcement yesterday, AUD surged to 0.7048 but the up-move was short-lived. While our narrative remains as “a break of 0.6950 would shift focus to 0.6910″, after yesterday’s price action, the prospect for such a scenario has diminished. That said, only a move above the 0.7060 ‘key resistance’ (no change in level) would indicate that the 0.6960 low registered on Monday (06 May) is a short-term bottom.
NZD/USD:
24-HOUR VIEW: NZD is expected to trade sideways, likely between 0.6555 and 0.6605. NZD briefly crashed to 0.6525 before rebounding quickly to trade mostly sideways. The price action is viewed as part of a consolidation phase. In other words, NZD is expected to trade sideways for today, likely between 0.6555 and 0.6605.
1-3 WEEKS VIEW: NZD is expected to test the rising weekly trend-line at 0.6500. There is not much to add to the update from yesterday (08 May, spot at 0.6560). As highlighted, NZD would likely depreciate further in the coming days and the focus is at the rising weekly trend-line connecting the 2015 and 2018 lows (trend-line is currently sitting at 0.6500). This is a solid level and may not yield so easily. Overall, NZD is expected to remain under pressure unless it can reclaim the 0.6630 ‘key resistance’ (no change in level).
USD/JPY:
24-HOUR VIEW: USD is expected to trade sideways to slightly lower, likely within a 109.85/110.30 range. We expected USD to “test 110.00 first before stabilizing” yesterday. USD subsequently dipped to 109.89 before recovering. While downward pressure has waned, it is too early to expect a significant rebound. From here, USD is more likely to consolidate and trade sideways to slightly lower, expected to be within a 109.85/110.30 range.
1-3 WEEKS VIEW: Focus is at the March low of 109.70. No change in view, see reproduced update below. However, ‘key resistance’ has moved lower to 110.90 from 111.10. There is not much to add to the update from Monday (06 May, spot at 110.65). As highlighted, USD is deemed to have moved into a negative phase and the focus is at the March low of 109.70. This is a rather solid support and may not yield so easily (next support is at 109.35). On the upside, the ‘key resistance’ level has moved lower to 111.10 from 111.45. Only a break of the ‘key resistance’ would indicate the current negative phase has ended.
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