A new week kicks off with currencies looking for a new direction. Where next?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): The major 1.1400 support appears to be ‘vulnerable’.
EUR failed to break the 1.1430 support last Friday, staged a robust rebound from a low of 1.1431 and hit a high of 1.1534. The price action is incongruent with our view wherein we think the major support 1.1400 support is ‘vulnerable’. However, only a break of the ‘key resistance’ at 1.1540 (no change in level) would indicate that the current downward pressure has eased. That said, the prospect for a break of 1.1400 has clearly diminished.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Break of 1.3000 would shift focus to 1.2920/25. No change in view.
GBP plunged and lost -0.70% yesterday as it closed at 1.3019 in NY. While the bottom of our expected 1.3000/1.3250 consolidation range is still intact, the impulsive decline suggests further GBP weakness is likely in the coming days. As highlighted yesterday (18 Oct, spot at 1.3110), “a break of 1.3000 would suggest that GBP is ready to tackle the 1.2922 low seen earlier this month” (even though the anticipated price action has evolved much faster than expected). In other words, instead of trading sideways, GBP has likely moved into a ‘negative’ phase. Only a break of the ‘key resistance’ at 1.3125 would indicate that the current downward pressure has eased.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD likely to trade within a broad range. No change in view.
There is not much to add as AUD hardly budged and remains within a 0.7095/0.7160 range since late last week. The underlying tone has weakened somewhat but at this stage, we are comfortable in holding the same view (since last Friday, 12 Oct, spot at 0.7120) wherein AUD is trading within a broad 0.7040/0.7200. From here, 0.7040/0.7160 is likely enough to contain the movement in AUD, at least for the next one week or so.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Stronger recovery only if above 0.6630.
The strong rebound in NZD last Friday came as a surprise. That said, we still think it is premature expect a sustained up-move in NZD. Only a clear break of 0.6630 would indicate that NZD is ready for a sustained recovery. For now, we continue to expect NZD to trade sideways, albeit with a positive bias.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD has moved into a consolidation phase. No change in view.
There is not much to add to yesterday’s (18 Oct, spot at 112.65) update. As highlighted, the 111.61 low registered on Monday (15 Oct) is likely a short-term bottom and USD has moved into a 111.80/113.30 consolidation range. Looking ahead, the risk of a break of the bottom of the range appears to be higher but even then, any decline has to contend with the rather strong support zone between 111.50 and 111.60.
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