The US Dollar is on the back foot following hope for a trade deal and other events. The Non-Farm Payrolls is coming. How are currencies positioned?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Negative phase has ended; immediate bias is for EUR to probe the top of the expected 1.1330/1.1490 consolidation range.
We highlighted on Wednesday (31 Oct, spot at 1.1345), “we are near an ‘inflection’ point wherein the price action in the next couple of days would determine whether EUR would continue to head south in the coming days (and possibly weeks) or stabilize to consolidate and trade sideways”. The break of the 1.1400 ‘key resistance’ indicates that the ‘negative’ phase that started about 2 weeks ago has ended and we could finally change our narrative that “EUR is still weak, but prospect for a sustained break below the year-to-date low of 1.1297 is not that high”. From here, the 1.1299 low registered on Tuesday (31 Oct) is deemed as a short-term bottom and this level is expected to hold for the next couple of weeks. The current movement is viewed as the early stages of a sideway trading phase even though the immediate bias is for EUR to probe the top of the expected 1.1330/1.1490 consolidation range.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Rebound in GBP has room to extend higher to 1.3100.
While we indicated yesterday (01 Nov, spot at 1.2830) that the “negative phase has ended” and expected the “recovery to extend higher”, the subsequent explosive price action that sent GBP rocketing to a high of 1.3036 came as a surprise (to put it mildly). Despite the outsized rally, we do not think the price action is the start of a major bullish reversal. That said, we see room for the current GBP strength to extend to 1.3100 but in view of the severely overbought conditions, the rally should at least temporary ease upon off from there. On the downside, 1.2840 is likely strong enough to hold any interim GBP weakness, at least for the next one week or so.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Scope for AUD to test the key and critical 0.7260 resistance.
While we indicated early yesterday (01 Nov, spot at 0.7085), “looking ahead, a break of 0.7140 would suggest the start of a recovery phase that could potentially extend to 0.7200”, the ‘sped-up’ price action that sent AUD surging to a high of 0.7213 within hours came as a surprise. After making a monstrous gain of +1.88% (NY close of 0.7207), there is scope for AUD to test the key and critical 0.7260 resistance. This level is the 8-1/2 month declining trend-line (not visible in the chart below) and a clear break of this resistance would indicate that last week’s 0.7021 low could turn out to be a significant mid to long-term bottom. Meanwhile, AUD is expected to stay underpinned in the coming days with 0.7110 acting as a ‘key support’.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Scope for NZD to test the September’s peak of 0.6700.
We indicated on Wednesday (31 Oct), “looking ahead, a break of 0.6580 would indicate that NZD is ready to tackle the month-to-date high at 0.6620”. Instead of ‘tackling’ 0.6620, NZD blast past this level in a hurry and surged to a high of 0.6660 (for a supersized gain of +2.10%, NY close of 0.6653). For now, the overall outlook for NZD is still deemed as neutral but the current strength has scope to test the September’s peak of 0.6700 in the coming days. Only a move below 0.6565 would indicate that the current upward pressure has eased.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD has moved back into a range trading phase.
After touching a high of 113.38 on Wed (31 Oct), USD slipped and edged below the strong 112.60 support (overnight low of 112.59). As highlighted yesterday, a break of this level is enough to indicate that upward pressure has eased. After the recent whippy price action, the near-term outlook is clouded and from here, it seems that USD has likely moved back into a range trading phase. Expected range for the next couple of weeks; 112.00/113.50.
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