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Thomson Reuters
Apr 18 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
First appeared on eFXplus on Apr 18 - 12:00 AM

EUR/USD: A NY close above 1.1330 would suggest EUR is ready to tackle 1.1400.

The strong 1.1330 resistance first indicated on Monday (15 Apr, spot at 1.1300) remains ‘unchallenged’ as EUR eased off after touching 1.1324 during London hours. As highlighted earlier yesterday, EUR has to “start cracking and move above 1.1330 soon (say within these few days) or a prolonged consolidation around current levels would lead to a rapid loss in momentum”. In other words, while we continue to hold the view that “a NY close above 1.1330 would suggest EUR is ready to tackle 1.1400”, the prospect for such a scenario has diminished after yesterday’s price action. On the downside, a break of the 1.1255 ‘key support’ (level previously at 1.1240) would suggest that the current upward pressure has eased.

GBP/USD: GBP is expected to continue to trade sideways. No change in view from yesterday, see reproduced update below.

After trading in a quiet manner for several days, GBP slipped and closed lower by -0.39% (NY close of 1.3048). While downward pressure has ticked up, it is too soon to expect a sustained decline. From the perspective of several weeks, we continue to view the current price action in GBP as part of a sideway-trading phase (we have held the same view for about 2 weeks now). That said, the slight uptick in downward pressure suggests GBP could drift lower and probe the bottom of the expected 1.2950/1.3200 range within the next few days. At this stage, the prospect for a sustained drop below 1.2950 is not high.

AUD/USD: AUD strength could extend to 0.7210.

We have held the same view since Monday (15 Apr, spot at 0.7170) wherein the strength in AUD “could extend to 0.7210”. AUD came within a few pips of this level as it touched 0.7206 yesterday (17 Apr) before easing off quickly to end the day little changed at 0.7179 (note that AUD has closed little changed for the past 4 days). While we continue to hold the view that “0.7210 is a rather critical resistance and a clear break of this level would suggest AUD is ready to move even higher in the coming weeks”, the lackluster price action suggests that the odds for a sustained rise above 0.7210 are not high. That said, only a break of the 0.7130 ‘key support’ (level was at 0.7115 yesterday) would suggest that a short-term top is in place. Looking ahead, a clear break of 0.7210 would shift the focus to 0.7260 followed by the year-to-date high at 0.7296.

NZD/USD: Negative phase has been ‘revived’; NZD is expected to move below 0.6660. No change in view from yesterday, see reproduced update below.

We highlighted on Monday (15 Apr, spot at 0.6770) that “while our 0.6785 ‘key resistance’ is still intact, the price action suggests that the risk of a short-term bottom has increased”. We added, “meanwhile, NZD could attempt to move towards 0.6700 but the odds for such a move have diminished considerably”. The ‘key resistance’ remains intact as NZD nose-dived this morning (after the release of weaker than expected NZ inflation data) and sliced through 0.6700 (low of 0.6668 at the time of writing). The low of 0.6668 is not far above a relatively strong 0.6660 support but below 0.6660, the next significant support level is about another 70 pips lower at 0.6591 (the year-todate low in early-Jan when USD/JPY was hit by a ‘flash crash’). All in, the price action this morning suggests that the ‘negative phase’ that started 3 weeks ago (27 Mar, spot at 0.6830, after RBNZ hint of a possible rate cut) has been ‘revived’. Oversold short-term indicators suggest NZD could consolidate for a few days first but as long as the 0.6785 ‘key resistance’ remains intact, NZD is expected to move below 0.6660. Further weakness to 0.6591 is not ruled out but at this stage, the odds are not that high.

USD/JPY: USD is expected to trade with a positive bias but 112.60 could be out of reach. No change of view from yesterday, see reproduced update below.

USD had another quiet day and traded within a tight range before ending the day largely unchanged (NY close of 111.99, -0.03%). For now, we continue to hold the same as on Monday (15 Apr) wherein USD “is expected to trade with a positive bias but 112.60 could be out of reach”. All in, we expect USD to trade with a positive bias and only a break of the 111.40 ‘key support’ (level was at 111.20 previously) would suggest that the current ‘positive phase’ in USD has ended.

Source:
UOB Research/Market Commentary

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