jpy - Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB
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Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY – UOB

USD/JPY: 

24-HOUR VIEW USD could test 108.00 but prospect for a sustained decline is not high. We expected “more USD weakness” last Friday but the ease of which it cracked the solid 109.00 support and the subsequent sharp sell-off came as a surprise. The outsized decline appears to be running to fast, too soon and while a test of 108.00 is not ruled out, the prospect a sustained decline below this level is not high. All in, USD is expected to stay under pressure unless it can move back above 108.65. The next resistance at the ‘break-down’ level of 109.00 is not expected to come into the picture, not only for today but also for the next couple of days.

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1-3 WEEKS VIEW USD has moved into a negative phase, weakness could extend to 107.70, 107.50. We indicated last Friday (31 May, spot at 109.40) that “looking ahead, the current consolidation is expected to be resolved by a downside break but 109.00 is a solid support and this level may hold for a while more”. We added, “if USD were to register a daily closing below this level, it would indicate the start of a sustained decline to 108.45 (and possibly lower)”. However, the subsequent price action came as a surprise as it played out in a ‘fast-forward’ manner as USD sliced through 109.00 and plunged to 108.26 (before closing right at the low for a loss of -1.22%, the largest 1-day decline in 2 years). In other words, USD has moved into a ‘negative phase’ even though the decline appears to be running ahead of itself. That said, there is scope for the weakness to extend to 107.70 (there is another strong support at 107.50). On the upside, only a move above 109.30 would indicate that the current weakness has stabilized. Shorter-term, 109.00 is already a formidable level.

  • The S&P futures are down 0.6% and the 10-year US yield -2 pips to 2.12%
  • Trade war fears continue to spook investors out of risk into safe-haven
  • USD/JPY under pressure in Asia after 1.25% fall on Friday
  • Beow 50% of 104.10112/40 at 108.25 next support at Jan 10 low at 107.77
  • Resistance at former support around 109.00 with sellers around 108.60/70
  • There is talk of bids ahead of 108.00 that may cushion fall for time being

EUR/USD: 

24-HOUR VIEW Recovery has scope to test the strong 1.1190 resistance. Expectation for EUR to “dip below 1.1100” did not materialize as it rebounded strongly to a high of 1.1181. While there is not much improvement in upward momentum, the recovery has scope to test the strong 1.1190 resistance. A move above this level would not be surprising but in view of the lackluster momentum, a break of the next resistance at 1.1215 appears highly unlikely. Support is at 1.1145 followed by 1.1120. The 1.1100 level is acting as a solid support now and is not expected to come into the picture.

1-3 WEEKS VIEW EUR is expected to trade with downside bias and test 1.1100/05. There is no change in view from last Friday (see reproduced update below), a move above 1.1190 would indicate that the current mild downward pressure has eased (EUR would then likely to trade sideways for a period).

There is not much to add to the update from yesterday (30 May, spot at 1.1135). As highlighted, the underlying tone in EUR has weakened but EUR has to register a daily closing below the major 1.1100/05 support level in order to indicate that a move to 1.1050 has started. In view of the lackluster momentum, the prospect for such a scenario is not high but EUR has to move above 1.1190 (level was at 1.1205 yesterday) in order to indicate that the current mild downward pressure has eased. Meanwhile, EUR is expected to trade with a downside bias and test 1.1100/05.

GBP/USD: 

  • Cable is gently bid in Asia, up 0.15%, with EUR/GBP -0.1% leading
  • Potential German political uncertainty as SPD leader resigns nL8N239081
  • EUR/GBP flows dominated early – knee jerk reaction to the German news
  • +0.1%, extending Friday’s 0.15% gain against a broadly weaker USD
    Trump to become the ringmaster for the UK political circus nL8N2390QE
    Pace of UK manufacturing growth softens on Brexit uncertainty nL4N2373U8
  • Soft UK manufacturing growth as EU customers stay away nL4N2373U8
  • Earlier 1.2630 low and 1.259 10 DMA are initial support/resistance



24-HOUR VIEW Room for GBP to edge higher but the strong 1.2685 resistance is unlikely to yield so easily. We highlighted last Friday that GBP “could retest the low near 1.2580 but next support at 1.2555 is not expected to come into the picture”. While the 1.2555 level held as expected, the subsequent sharp and swift rebound from a low of 1.2560 was not exactly expected. The rapid bounce suggests that 1.2560 could be an interim low and this level is not expected to come into the picture. That said, it is too soon to expect a sustained up-move. From here, there is room for GBP to edge higher but the strong 1.2685 resistance is unlikely to yield so easily. Support is at 1.2615, 1.2590.

1-3 WEEKS VIEW

 GBP is expected to trade with a downside bias. We indicated last Friday (31 May, spot at 1.2615) that the decline in GBP “clearly lacks momentum”. While we expect GBP to trade with a “downside bias”, we were of the view that “GBP has to register a daily closing below 1.2600 in order to indicate the start of a ‘negative phase’ towards 1.2530”. GBP subsequently dipped briefly to 1.2560 before rebounding strongly to end the day higher by +0.15% (NY close of 1.2629). Despite the sharp bounce, only a move above 1.2685 would indicate that the current downward pressure has eased. Until then, another ‘stab’ on the downside is not ruled out but after last Friday’s price action, GBP is unlikely to move into a fresh ‘negative phase’ (more likely to consolidate and trade sideways at these lower levels).

AUD/USD: 

  • AUD/USD up slightly after Aus company profits and inventories nS9N21K00C nS9N21K00C
  • Next level of resistance at the 38.2 of 0.7206/0.6865 at 0.6995
  • AUD/USD has been resilient given the selloff in equities & commodities



24-HOUR VIEW Improved underlying tone suggests AUD could probe the 0.6960 resistance. Expectation for AUD to “dip below the overnight low of 0.6898” did not materialize as it traded sideways within a 0.6901/0.6944 range. The underlying tone has improved and the intraday bias is for AUD to probe the 0.6960 resistance. For today, a move above 0.6985 would come as a surprise. On the downside, 0.6900 is expected to be strong enough to hold any intraday pull-back.

1-3 WEEKS VIEW Short-term bottom in place, AUD is expected to trade sideways. No change in view from last Friday, see reproduced update below.

AUD spent another day ‘going nowhere’ as it closed little changed at 0.6911 (-0.08%). The quiet price action is line with our expectation from Monday (27 May) wherein AUD is “expected to trade sideways” for a couple of weeks. Note that for the past few days, the daily change in AUD has been less than 0.10%. Looking ahead, the ‘sideway-trading phase’ is more likely to be resolved with the start of fresh ‘negative phase’ but this is only upon a clear break of 0.6860. Meanwhile, a 0.6860/0.6985 range is expected to be more than enough to contain the price action in AUD for another week or so.
 
NZD/USD: 

24-HOUR VIEW NZD could extend its rebound to 0.6570 but a sustained advance appears unlikely. Expectation for NZD to trade sideways was incorrect as it rose to 0.6547 last Friday. Upward momentum has picked up albeit not by much. From here, NZD could extend its rebound to 0.6570. While a move above this level would not be surprising, a sustained advance seems unlikely. Support is at 0.6515 followed by 0.6500. The latter level is acting as a rather strong support now.

1-3 WEEKS VIEW Short-term bottom is in place; NZD is expected to trade sideways. The narrative from last Thursday (30 May) is still valid (see reproduced update below).

After trading in a subdued manner for a couple of days, NZD staged a relatively sharp drop that came close to the bottom our expected 0.6500/0.6610 range (low of 0.6504). While the underlying tone has clearly weakened, it is too soon to expect the start of a fresh ‘negative phase’. Only a daily closing below 0.6470 would indicate that NZD is ready to move to 0.6425. Meanwhile, the current price action is still deemed as a ‘sideway-trading phase’ but after yesterday’s price action, we have lowered the expected range to 0.6480/0.6570 (from 0.6500/0.6610).