A new week begins with a political crisis in the UK and NATO meetings. What´s next for currencies? Here are the views from UOB.
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 05 Jun 18, 1.1700): Outlook for EUR is positive, break of 1.1790 could lead to the rapid rise to 1.1850.
We highlighted last Friday (06 Jul, spot at 1.1690) that the “undertone for EUR has improved further” and there is “scope for a move to 1.1750 within the next few days”. EUR subsequently took out 1.1750 with ease and the strong and rapid up-move suggests that further EUR strength is likely in the coming days. While we are not ready to adopt a bullish stance just yet, a clear break of 1.1790 could lead to a rapid rise to last month’s top near 1.1850. The 1.1850 level is acting as a major resistance and is unlikely to yield so easily. All in, we expect EUR to stay supported from here unless there is a break below the ‘key support’ at 1.1665.
GBP/USD: Neutral (since 25 Jun, spot at 1.3265): GBP to stay supported, chance for further strength to 1.3400.
In last Thursday’s update (05 Jul, spot at 1.3230), we noted the “improved undertone” and held the view that GBP “is ready to test the top of the range at 1.3280”. GBP subsequently took out this level on Friday and extended its gain early this morning as it hit a high of 1.3328 during Sydney hours. The undertone has improved further and while we are not ready to adopt a bullish stance just yet, we expect GBP to stay supported and see chance for further GBP strength to 1.3400. A clear break of this level would open up the way for a test of the major 1.3470/75 level (the peak in June). On the downside, only a move back below the ‘key support’ at 1.3200 would indicate that the current upward pressure has eased.
AUD/USD: Neutral (since 05 Jul 18, 0.7380): Scope for a stronger rebound to 0.7500.
We turned neutral last Thursday (05 Jul, spot at 0.7380) and expected AUD to trade sideways within a 0.7320/0.7450 consolidation range. The rapid pace of which it approaches the top of the expected range (high of 0.7444 last Friday) suggests the undertone has improved. From here, there is scope for AUD to stage a stronger rebound to 0.7500. At this stage, the prospect for a clear break of this level is not high but it would continue to improve as long as the ‘key support at 0.7370’ is intact.
NZD/USD: Neutral (since 06 Jul, 0.6795): Break of 0.6850/60 would suggest a stronger recovery in NZD.
We just shifted from a bearish to neutral stance last Friday (06 Jul, spot at 0.6795) and there is no change to the view. That said, NZD subsequently advanced quickly and is currently approaching the strong 0.6850/60 resistance. A break above this level would indicate a marked improvement in the underlying tone and could lead to a stronger recovery to 0.6890, with lower odds for extension to 0.6920.
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD to stay supported but any strength is unlikely to be sustained. No change in view.
The price actions over the past couple of days offer no fresh clues and we continue to hold the same view wherein “USD is expected to stay supported but any strength is unlikely to be sustained”. Only a break of the 110.10 ‘key support’ would indicate that the current upward pressure has eased. Until then, there is scope for USD to test the recent high near 111.10 but at this stage, the odds for further extension to 111.50 are not high.
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