A new week begins after a volatile one ended. What’s next? What levels should we watch on key currency pairs?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Immediate bias is for EUR to probe the bottom of the expected 1.1470/1.1640 range.
Our recent expectation for EUR to extend its rebound was proven wrong as it plummeted last Friday and hit a low of 1.1548. While the low was just above the 1.1530 ‘key support’, the weak daily closing in NY is enough to indicate that the recent mild upward pressure has eased. From here, the underlying tone has weakened but it is premature to expect the start of a sustained decline in EUR. The outlook is still deemed as neutral even though the immediate bias is for EUR to probe the bottom of the expected 1.1470/1.1640 consolidation range.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Still neutral; GBP expected to trade within a broad range.
GBP rose to a high of 1.3029 last Friday, relatively close to the top our expected 1.2800/1.3050 consolidation range before falling sharply back to a low of 1.2910. As highlighted in recent updates, the immediate outlook for GBP is unclear after the recent volatile price actions and we continue to hold a neutral stance and expect GBP to trade sideways, likely within a broad 1.2800/1.3050 range.
AUD/USD: Bearish (since 03 Sep 18, 0.7185): Outlook is still clearly bearish, expect further AUD weakness to 0.7035.
We have been bearish AUD since early this month (see update on 03 Sep, spot at 0.7185) but indicated that we are mindful of the longterm 0.7145/60 support zone. AUD held above this support zone for several days and we warned last Thursday (06 Sep, spot at 0.7195) that “AUD has to break the major support soon”. The support zone finally cracked last Friday as AUD plunged to a low of 0.7099. From here, the outlook is still clearly bearish and we anticipate further AUD weakness to 0.7035, with decent odds for further extension to 0.7000. That said, in view of the oversold conditions, AUD may not be able to maintain the current pace of decline. On the upside, the ‘stop-loss’ level is adjusted to 0.7195 from 0.7260. On a shorter-term note, 0.7160 is already a strong resistance.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Scope for further NZD weakness to 0.6475.
We have held a negative view on NZD since last Wednesday (05 Sep, spot at 0.6550) and expect NZD to weaken to 0.6475. After coming close to taking out the ‘key resistance’ at 0.6620 (high of 0.6616 on Thursday), NZD plunged last Friday and registered a fresh year’s low of 0.6528 (albeit marginally below the previous low of 0.6530). While the immediate pressure is still on the downside, we are not convinced that the current weakness can move below 0.6475 in a sustained manner. That said, only a break back above 0.6590 would indicate that a short-term low is in place (‘key resistance’ previously at 0.6620).
USD/JPY: Neutral (since 23 Jul 18, 111.20): Still neutral, USD could continue to trade in a choppy manner.
USD dipped to a low of 110.37 last Friday before rebounding sharply to end the day on a firm note. The volatile price action continues to cloud the immediate outlook and we are maintaining our neutral USD stance for now. Further choppy price actions would not be surprising and only a break out of last month’s 109.76/112.14 range would suggest that USD is ready for a directional move.
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