Currencies are still experiencing their Easter slumber, but this is unlikely to last, especially as China is retaliating against the US trade tarrifs. What ´s next?
EUR/USD: Neutral (since 05 Mar 18, 1.2335): Further erratic price action is likely.
The recent erratic price action has resulted in a mixed outlook. Indicators are mostly ‘flat’ and at this stage, there is no early indication that EUR is ready to embark on a sustained directional move. In other words, the month-long neutral phase is intact and we expect EUR to continue to trade choppily within a broad 1.2235/1.2475 range. Looking further out, 1.2235 is acting as a solid support and a break of this level would increase the odds for a move below the March’s low of 1.2153.
GBP/USD: Neutral (since 07 Mar 18, 1.3895): Odds for a move higher to test 1.4280 have diminished.
While the pull-back from last Tuesday (27 Mar) 1.4244 peak is deeper and more resilient than expected, we continue to detect a positive undertone and still see chance for GBP to move higher and test the major 1.4280 resistance. Only a clear break below 1.4000 would indicate that the current mild upward pressure has eased. However, a break of 1.4000 would not shift the current neutral phase to bearish but would indicate that GBP has moved into a lower consolidation range. All that said, GBP has to move and stay above 1.4100 within these few days or the odds for a move towards 1.4280 would diminish further.
AUD/USD: Neutral (since 22 Mar 18, 0.7770): AUD has moved into a consolidation phase.
In the latest update on Wednesday last week (28 Mar, 0.7680), we highlighted that “a dip below the expected 0.7650/0.7820 consolidation range is not ruled out but at this stage, the prospect for a sustained decline towards the major 0.7600 support is rather low”. AUD subsequently dipped to a low of 0.7643 before rebounding quickly. The price action reinforces our current view and there is no change to our neutral stance. The recent downward bias is easing and but it is too early to expect a sustained recovery. To put it another way, we continue to expect AUD to trade sideways for now, albeit likely within a narrower and lower range of 0.7630/0.7770.
NZD/USD: Neutral (since 05 Feb 18, 0.7280): NZD has moved back into a consolidation mode.
There is not much to add as NZD dipped to a low of 0.7189 last Thursday (29 Mar) before rebounding quickly. As highlighted in recent updates, while the immediate bias is tilted to the downside, any weakness is viewed as part of a 0.7150/0.7305 consolidation range and not the start of a sustained decline. Only a clear break below 0.7150 would indicate that NZD is ready to embark on a sustained downmove.
USD/JPY: Neutral (since 21 Feb 18, 107.35): Strong rebound has room to extend to 107.90.
As highlighted on Tuesday (27 Mar, 105.45), the 104.55 low seen on Monday is likely a short-term low but instead of consolidating between 104.80/106.65 (as expected previously), USD appears to have room to extend its rebound towards 107.90. At this stage, we do not anticipate a sustained move above this level. On the downside, only a move back below 105.70 would indicate that the current upward pressure has eased.
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