EUR/USD: Shift from bearish to neutral: Chance for EUR to test the major 1.1630 resistance.
We highlighted yesterday (20 Aug, spot at 1.1435) that “the bearish phase appears to be close to ending” and the break of 1.1460 indicates that the outlook for EUR has shifted to neutral. As highlighted yesterday, it is too early to expect a major bullish reversal even though the gain made by EUR over the past few days has been more ‘robust’ than expected. While the outlook is deemed as neutral, the immediate bias is on the upside and we see chance for EUR to test the major 1.1630 resistance. That said, it could take several days before this level would come into the picture. On the downside, only a break below the current ‘key support’ at 1.1420 would indicate that the prevalent upward pressure has eased.
GBP/USD: Shift from bearish to neutral: GBP has moved into a consolidation phase.
We have warned of the “increasing risk of an interim low” since last Thursday (16 Aug, spot at 1.2700) and the break of the 1.2780 ‘stoploss’ during NY session yesterday finally confirms that GBP has found a bottom at 1.2662 last week. In other words, the outlook for GBP has shifted from bearish to neutral. From here, we view the current price action as the early stages of a consolidation phase and expect GBP to trade sideways. That said, shorter-term indicators are on the positive side and the immediate bias is for GBP to probe the top of the expected 1.2700/1.2960 consolidation phase.
AUD/USD: Shift from bearish to neutral: AUD has moved into a consolidation phase.
We highlighted yesterday (20 Aug, spot at 0.7310) that the odds for further AUD weakness have diminished and the subsequent break of the 0.7330 ‘stop-loss’ was not exactly unexpected. The outlook for AUD has shifted to neutral now and we view the current price action as the early stages of a consolidation phase. That said, the immediate bias is tilted to the upside and AUD is more likely to test the top of the expected 0.7270/0.7420 consolidation range first.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): NZD has moved into a consolidation phase.
We just turned neutral on NZD yesterday (20 Aug, spot at 0.6625) and there is no change to the view. As highlighted, we view the current movement as the early stages of consolidation phase. In other words, NZD is expected to trade sideways from here, likely within a 0.6560/0.6690 range.
USD/JPY: Neutral (since 23 Jul 18, 111.20): Slightly negative outlook, scope for USD to test 109.35.
USD closed on a relatively weak note yesterday (NY close of 110.06, -0.38%) and is currently approaching the bottom of our previously expected 109.85/111.50 consolidation phase. While downward momentum has picked up, it is too early to expect the start of a sustained decline. That said, we see scope for USD to test the 109.35 support and only a clear break of this level would indicate that USD is ready to challenge the May’s low of 108.10. All in, we hold a slightly ‘negative’ view on USD for now unless it can move and stay above the ‘key resistance’ at 110.70