EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR is vulnerable now, focus is at 1.1120.
Despite the relatively robust recovery in EUR, there is no change to our view. As highlighted early last Friday (08 Mar, spot at 1.1195), “EUR is vulnerable and the focus is at 1.1120”. The current short-term movement is deemed as part of a consolidation phase that could last for a couple of days. Only an unlikely break of the 1.1290 ‘key resistance’ (no change in level) would indicate that the current weak phase in EUR has stabilized.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP is under pressure but expect strong support at 1.2870.
While we have held the view that a “short-term top is in place” since last Monday (05 Mar, spot at 1.3180), we expected GBP to “trade sideways” and the deep pull-back last Friday that moved below the bottom of our 1.3000/1.3260 range (low of 1.2990) came as a surprise (note that GBP extended its decline upon opening this morning). The price action suggests that the 1.3351 high registered on 27 Feb is a more significant top than previously expected. From here, we expect GBP to remain under pressure unless it can move back above 1.3120. That said, there are several strong support levels on the downside, notably at 1.2870 followed by 1.2800 and these levels may not be easy to crack. In the short-term, oversold conditions could lead to a couple of days of consolidation first.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD is ready to tackle the 0.6970 support. No change in view from last Friday, see reproduced update below.
We indicated yesterday (07 Mar, spot at 0.7030) that “0.7010 is likely to come into the picture sooner than expected”. AUD subsequently dropped to 0.7005 before ending the day on a soft note (NY close of 0.7015, -0.24%). As highlighted, a “break of 0.7010 would suggest AUD is ready to tackle the next support at 0.6970”. On the upside, only a break of the 0.7090 ‘key resistance’ (level was at 0.7110 yesterday) would indicate that a short-term bottom is in place.
NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD to stay on the defensive but expect 0.6720 to offer solid support.
There is not much to add to our recent updates. As highlighted, “NZD is to stay on the defensive but expect 0.6720 to offer solid support”. In other words, downward momentum is not exactly strong and for now, the prospect of a break of 0.6720 is not high. On the upside, a break 0.6840 would indicate that the current mild downward pressure has eased.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD is under mild downward pressure, could grind lower and test 110.40.
We highlighted on Friday (08 Mar, spot at 111.60) that “time is running out for those who are anticipating a higher USD” and added, “a break of the 111.30 ‘key support’ would not be surprising”. USD subsequently cracked 111.30 and dropped to 110.77. The price action suggests that last week’s 112.12 high is a short-term top (note that we had held the view that USD would find it difficult to break the solid 112.00/20 resistance zone). From here, the bias is tilted to the downside but downward momentum is not strong and any weakness in USD is expected to be slow and grinding and could be limited to a test of 110.40. On the upside, a break of 111.80 would indicate that the current mild downward pressure has eased.