The US Dollar is still looking good as October draws to a close. What levels should we look at?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR is still weak, but prospect for a sustained break below the year-to-date low of 1.1297 is not that high.
EUR traded in a muted manner yesterday and held within last Friday’s range (an ‘inside day’). The price action offers no fresh clue and while the ‘negative’ phase in EUR that started more than a week ago is still deemed as intact (see update on 18 Oct, spot at 1.1505), we continue to see low risk for a sustained break of the next support at 1.1297 (year-to-date low). That said, only a move above the 1.1450 ‘key resistance’ (no change in level) would indicate that the ‘negative’ phase has ended and a short-term bottom is in place. Meanwhile, EUR could continue to consolidate and trade sideways at these lower levels for the next couple of days.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP is searching and possibly close to making a short-term bottom.
There is not much to add to yesterday’s (29 Oct, spot at 1.2830) update. As indicated, the recent price action suggests GBP is likely searching and is possibly close to finding a short-term bottom. However, only a break of the 1.2890 ‘key resistance’ (no change in level) would indicate that the ‘negative’ phase that started more than a week ago (see update on 19 Oct, spot at 1.3020) has ended. Until then, GBP could dip towards the 1.2750 support but we apportion low odds for a sustained move below this level (next support is at 1.2700 followed by the year’s low at 1.2662).
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Prospect for a move to 0.7000 is not high. No change in view, see update from yesterday below.
AUD staged a brief decline last Friday and rebounded strongly from a low of 0.7021 to close higher for the day (NY close of 0.7087, +0.11%). After several days of ‘quiet’ price action, the sudden burst in volatility came as a surprise. In recent updates, we expected AUD “to trade with a slight downward bias” and were of the view that a break of the 0.7041 year-to-date low would shift the focus to 0.7000. This scenario is still intact but after last Friday’s price action, the prospect for a move to 0.7000 is not high. Meanwhile, the bias is still on the downside and only break of 0.7140 would suggest the current mild downward pressure has eased.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Still sideways albeit within a wider range. No change in view.
We expected NZD to trade sideways since early last week (23 Oct, spot at 0.6560) and the break of the bottom of the anticipated 0.6490/0.6580 consolidation range last Friday came as a surprise. However, the decline was not sustained as NZD rebounded strongly from a low of 0.6466 to close largely unchanged for the day (NY close of 0.6525, +0.01%). The price action is more akin to an ‘expansion in range’ instead of the start of a sustained decline. In other words, we continue to hold a neutral stance and expect NZD to trade sideways in the coming days, albeit within a wider 0.6460/0.6580 range.
USD/JPY: Neutral (since 09 Oct 18, 113.10): Diminished odds for further USD weakness.
While we expect USD to weaken further to 111.20, we warned yesterday (29 Oct, spot at 111.90) “this level may not come into the picture so soon”. That said, the robust rebound in USD yesterday that hit a high of 112.55 during NY hours came as a surprise. The high is not far from our 112.65 ‘key resistance’ and a break of this level would indicate that the current downward pressure has eased (and that last Friday’s 111.36 low is the extent of the current weak phase in USD). In other words, the odds further USD weakness have diminished. Looking ahead, a break of 112.65 would not change the current overall neutral outlook but would suggest USD has moved back into a consolidation phase.
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