The US Dollar is looking good as global fears grow. What’s next for currencies?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Prospect for a break of 1.1400 has diminished.
EUR broke the 1.1540 ‘key resistance’ but reversed quickly after touching a high of 1.1550. The subsequent weak daily closing in NY (1.1463, -0.43%) indicates that the underlying tone is still weak. That said, the prospect for a break of the major 1.1400 support has diminished. In order to improve the odds for a breach of 1.1400, EUR has to crack the strong 1.1430 level within these 1 to 2 days or the current price action would likely ‘morph’ into a consolidation phase. On the upside, the 1.1550 top is expected to be strong enough to cap any EUR strength, at least for the next few days.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Focus is at 1.2920/25.
We first painted the scenario that “a break of 1.3000 would suggest shift the focus to 1.2920/25″ last Friday (19 Oct, spot at 1.3020). The ‘key resistance’ for our view at 1.3125 remains intact as GBP touched a high of 1.3105 during late NY hours on Friday. Brexit headlines during London hours yesterday sent GBP reeling and the crack of 1.3000 support resulted in a quick drop to a low of 1.2957. Downward momentum has improved considerably and the focus is at 1.2920/25 now. At this stage, the probability for a sustained break of this major support is not very high but the odds would continue to improve unless GBP can reclaim the ‘key resistance’ at 1.3080 (level previously at 1.3125). On a short-term note, 1.3030 is already a strong level. Looking ahead a break of 1.2920/25 would suggest GBP is ready to tackle next support at 1.2870.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD to trade with downward bias.
After trading within a narrow 0.7090/0.7160 range since 12 Oct, AUD is ‘stirring to life’ as it dropped to an overnight low of 0.7077. While the underlying tone has weakened, it is premature to expect a sustained decline. That said, the prospect for a break of the year-to-date low of 0.7041 has increased, albeit not by much. All in, we expect AUD to trade with a slight downward bias for the next few days. Only a break above 0.7140 would suggest that the current mild downward pressure has eased. Looking ahead, a break of 0.7040 would shift the focus to the round number support of 0.7000.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): NZD to trade sideways for now.
Despite the sharp bounce in NZD that hit a high of 0.6620 early yesterday, we highlighted that it is premature to expect a sustained upmove in NZD. We added, only a clear break of 0.6630 would indicate that NZD is ready for a sustained recovery. That said, the subsequent swift and sharp drop from 0.6620 came as a surprise (overnight low of 0.6545). The risk for a break above 0.6630 has diminished and NZD is more likely to trade sideways from here, expected to be within a broad 0.6490/0.6620 range.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD has moved into a consolidation phase.
There is not much to add as USD edged higher and touched an overnight high of 112.88. The high is well within the expected 111.80/113.30 consolidation range that we first indicated last Thursday (18 Oct, spot at 112.65). Indicators are mostly ‘flat’ and at this stage, there is no early indication that USD is ready to break out the range.
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