The dollar’s weakening seemed to have stopped, but there are no new clear directions. What levels should we look out for?
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.
EUR touched a 3-week high of 1.1724 yesterday before easing off and ended the day on a soft note (NY close of 1.1665, -0.15%). While we continue see chance for EUR to move towards the major 1.1790 resistance, short-term momentum is ‘struggling’ and EUR has to move and stay above 1.1700 within these 1 to 2 days or the prospect for further strength would diminish quickly. On the downside, the ‘key support’ remains unchanged at 1.1605 even though a break of 1.1640 would serve as an early indication that a short-term top is in place.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Advance in GBP is approaching overbought but still scope for further strength.
We have held the same view since last Tuesday (11 Sep, spot at 1.3025) wherein we expect the rebound in GBP to extend to 1.3170. GBP finally reached this level as it touched an overnight high of 1.3173. As highlighted earlier yesterday (18 Sep, spot at 1.3150), while the advance in GBP is approaching overbought, there is no sign of weakness just yet and there is scope for further strength towards the next major level of 1.3215. This is a relatively strong resistance and a break of this level would be a good indication that GBP could continue to advance in the coming days. On the downside, the ‘key support’ is currently at 1.3045, higher from 1.3000 previously.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD has moved into a consolidation phase.
While AUD ended the day on a surprisingly solid note (NY close of 0.7219, +0.56%), there is no change to our view. The neutral phase that started last Thursday (13 Sep, spot at 0.7170) is still intact and we continue to view the current movement as part of a consolidation phase. That said, the improved underlying tone suggests that AUD could trade at higher 0.7140/0.7280 range instead of 0.7100/0.7240 that we expected previously.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): Still neutral but NZD likely to trade sideways for now.
There is not much to add as NZD touched a high of 0.6608 yesterday, not far from the top of our expected 0.6520/0.6615 consolidation range. The outlook for NZD remains as neutral and we continue to view the current movement as part of a sideway consolidation range.
USD/JPY: Neutral (since 23 Jul 18, 111.20): Upward momentum has improved, risk is still clearly on the upside.
We have held a ‘positive’ USD view since last Wednesday (12 Sep, spot at 111.60) where we highlighted “the probability for a test of last month’s 112.15 peak has increased”. While USD struggled to move clearly above 112.15, we indicated on Monday (17 Sep, spot at 112.00) that “USD strength lacks vigor, further up-move cannot be ruled out”. The sudden surge higher in USD yesterday came as a pleasant surprise as it closed on a solid note (NY close of 112.35, +0.35%). Upward momentum has improved considerably and the immediate risk is still clearly on the upside. From here, a move above 112.60 would not be surprising but there is another strong resistance level at 112.80 and this level may not yield so easily. All in, we continue to expect USD to stay supported in the coming days as long as the ‘key support’ at 111.55 is intact (level previously at 111.35).
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