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Jul 16 - 01:24 AM
Tech Targets: EUR/USD, GBP/USD, AUD/USD, USD/JPY - UOB
First appeared on eFXplus on Jul 16 - 12:00 AM

EUR/USD: 

24-HOUR VIEW EUR is expected to trade sideways, likely within a 1.1240/1.1280. EUR traded sideways between 1.1251 and 1.1284 yesterday, a narrower range than our expected 1.1245/1.1290. The quiet price action offers no fresh clue and further sideway trading is expected, albeit likely at a lower range of 1.1240/1.1280.

1-3 WEEKS VIEW EUR is expected to trade sideways. No change in view from yesterday, see reproduced update below.

EUR did not do much last Friday, dipping to 1.1236 before recovering to end the day slightly higher at 1.1269 (+0.15%). For now, we continue to hold the same view from last Thursday (11 Jul, spot at 1.1255) wherein EUR is expected to trade sideways between 1.1200 and 1.1310. At this stage, there is no early indication on which side of the range is more ‘vulnerable’.

GBP/USD: 

24-HOUR VIEW GBP could edge lower but is unlikely to threaten the strong 1.2470 support. Expectation for GBP to “test 1.2600” did not materialize as it slipped to an overnight low of 1.2510 (high of 1.2581 during early Asian hours). While the decline lacks momentum, there is scope for GBP to edge lower even though the strong 1.2470 support is unlikely to come under threat (minor support at 1.2490). Resistance is at 1.2540 followed by 1.2570. The 1.2581 top is not expected to come into the picture for today.

1-3 WEEKS VIEW GBP is expected to trade sideways. GBP snapped a 3-day advance and dropped to an overnight low of 1.2515. The price action is line with our view from last Friday (12 Jul, spot at 1.2525) wherein GBP is “expected to trade sideways”. The high of 1.2580 last Friday was not far below the top of our expected 1.2470/1.2600 range and now it appears GBP is ready to test the bottom of the range. A dip below 1.2470 is not ruled but GBP has to register a NY closing below 1.2440 in order to indicate that it is ready to move below the year-to-date low near 1.2410. At this stage, the prospect for such a scenario is not high.

AUD/USD: 

24-HOUR VIEW AUD could move above 0.7050 but the next resistance at is likely out of reach for today. Our view yesterday was that there is “scope for AUD to test the major 0.7050 resistance but a sustained rise above this level is unlikely”. AUD subsequently rose to 0.7041 before ending the day on a solid note (NY close of 0.7041). In view of the vastly improved momentum, a move above 0.7050 from here would not be surprising but the next resistance at 0.7070 is likely out of reach for today. On the downside, a breach of 0.7015 would indicate that the current upward pressure has eased.

1-3 WEEKS VIEW Sustained AUD strength is only likely if it can move and stay above the major 0.7050/70 resistance zone. AUD continues with its advance and registered a 4-day gain of 1.62% yesterday (15 Jul), the largest since January. While upward momentum has improved, we have doubts about the sustainability of the current advance. As highlighted yesterday, AUD has to break above the major 0.7050/70 resistance zone in order to indicate that it is ready to move higher in a sustained manner. 0.7050 was near the high registered earlier this month (and in early May) while 0.7070 is the minor peak in late April as well as a declining trend-line resistance (not visible in the chart below). In other words, the levels between 0.7050 and 0.7070 are solid resistance levels and at this stage, the risk for a clear break of this zone is not high. That said, only a move below 0.6980 (level was at 0.6960 yesterday) would indicate that the upside risk has diminished. Looking ahead, if AUD were to move and stay above 0.7070, it would suggest last month’s 0.6832 low could be a significant bottom.

USD/JPY:

24-HOUR VIEW USD is expected to trade sideways, likely within a 107.70/108.10 range. Our expectation for USD to “extend its decline and test the strong support at 107.50” did not materialize as it traded in relatively muted manner and within a tight range of 107.78/108.10. Momentum indicators have turned mostly ‘neutral’ with the quiet price action and USD is likely to continue to trade sideways. Expected range for today, 107.70/108.10.

1-3 WEEKS VIEW USD is expected to trade sideways. No change in view from yesterday, see reproduced update below.

Despite the relative sharp decline last Friday (107.89, -0.54%), we continue to hold the same view as from last Thursday (11 Jul, 108.30) wherein USD is expected to trade sideways within a relatively broad 107.50/108.95 range. A test of the bottom of the range would not be surprising but a sustained decline below the next support at 107.20 is unlikely.

Source:
UOB Research/Market Commentary

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