The US Dollar suffered losses following the disappointing US inflation report. What levels should we eye as the week draws to a close?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Probability for a move to 1.1790 has increased.
While we noted yesterday “the short-term downward pressure has eased” and expected EUR to “trade within a higher range”, the solid overnight gains were not exactly expected (EUR closed higher by +0.55%, the largest 1-day gain in 3 weeks). However, there is no change to the neutral outlook but the current short-term EUR strength could extend towards the July’s peak of 1.1790. At this stage, the probability for such a scenario is not high and only successive higher daily closings over the next few days would improve the odds for a move to 1.1790. On the downside, a break of 1.1605 is enough to indicate that current nascent build-up in momentum has fizzled out. Ideally, the minor support at 1.1630 should hold within the next couple of days.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Still neutral but corrective rebound could extend to 1.3170.
We have held the same view since Tuesday (11 Sep, spot at 1.3025) wherein the current rebound in GBP could extend to 1.3170. The price action over the past couple days bodes well for our view and 1.3170 appears to be within reach sometime next week. At this stage, we still do not expect a sustained move above this level but the odds for further upward extension have increased. On the downside, the ‘key support’ is raised to 1.3000 from 1.2900 previously.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD has moved into a consolidation phase.
We just shifted from a bearish to neutral stance yesterday (13 Sep) and there is no change to the view. As highlighted, the current movement is viewed as the early stages of a consolidation/correction phase. From a short-term perspective, the rebound could extend higher but any AUD strength is view as part of a 0.7100/0.7240 consolidation range and not the start of a sustained up-move.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Still neutral but NZD likely to trade sideways for now. No change in view.
While we expected a lower NZD, we highlighted in recent updates that “we are not convinced that the current weakness can move below 0.6475 in a sustained manner”. That said, the sudden overnight surge was unexpected as NZD hit a high of 0.6565. While there is no change to the current neutral outlook, the 0.6501 low registered on Tuesday (11 Sep) is deemed as a short-term bottom. From here, NZD is expected to trade sideways to slightly higher, likely within a 0.6520/0.6615 range.
USD/JPY: Neutral (since 23 Jul 18, 111.20): Probability for a test of last month’s 112.15 peak has increased.
While we indicated on Wednesday (12 Sep, spot at 111.60) that the “the probability for a test of last month’s 112.15 peak has increased”, the solid gain made by USD yesterday was not exactly expected (the +0.60% gain is the largest 1-day rise in 3 weeks). After the solid advance, a move above 112.15 would not be surprising but at this stage, it is unclear if any up-move can be sustained. However, as long as USD can hold above 111.35 within the next couple of days (‘key support’ previously at 110.85), the prospect for further USD strength to 112.60 would continue to improve.
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