EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR has moved into a consolidation phase.
While the ‘key resistance’ at 1.1430 is still intact (high of 1.1420 on Friday), the firm daily closing in NY of 1.1393 is enough to indicate that downward pressure has eased. In other words, our recent expectation for EUR to break the major 1.1265 level did not materialize. The current movement is viewed as the early stages of a consolidation phase. From here, EUR is expected to trade sideways for the next couple of weeks, likely within a 1.1320/1.1500 range.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP is expected to trade in a broad range.
The pace and extent of the rebound from Thursday’s 1.2409 low came as a surprise as GBP blast past the 1.2680 ‘key resistance’ last Friday (high of 1.2744). Our recent expectation for GBP to test the major 1.2400 support first was incorrect. The choppy price action has clouded the near term outlook for GBP. Indicators are showing mixed signals and the current movement could be the start of a period of broad consolidation. That said, there is a slight upward bias even though at this stage, any GBP strength is viewed as part of a broad 1.2600/1.2850 range. Looking further ahead, a clear break above 1.2850 would suggest GBP is ready to stage a sustained recovery in the weeks ahead.
AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): Outlook for AUD is slightly positive; a sustained move above 0.7205 seems unlikely.
The price action after last Thursday ‘flash crash’ came as a surprise. Instead of trading sideways, AUD surged past the strong level of 0.7055 (high of 0.7125 last Friday). As highlighted on Friday, a move back above 0.7055 would suggest AUD might not revisit the ‘flash crash’ low of 0.6715 anytime soon. From here, the outlook for AUD is slightly positive but while further gain is not ruled out, a sustained move above the next major resistance at 0.7205 seems unlikely (at least for the next couple of weeks). On the downside, last Friday’s low near 0.6995 is acting a solid support now. On a shorter-term basis, 0.7055 is already a strong level.
NZD/USD: Neutral (since 07 Dec 18, 0.6880): Strong recovery in NZD has scope to extend higher.
The break of the strong 0.6720 resistance last Friday (high of 0.6751) indicates that NZD has found short-term bottom at 0.6591 last Wednesday. The strong recovery has scope to extend further but at this stage, a sustained move above 0.6830 seems unlikely. Support is at 0.6675 but the stronger level is at 0.6645.
USD/JPY: Neutral (since 09 Oct 18, 113.10): USD is expected to trade sideways for now.
USD extended its ‘flash crash’ recovery as it hit 108.58 last Friday before ending on a firm note in NY at 108.52 (+0.80%). Despite the strong rebound, it is too soon to expect the start of a sustained USD rebound. In other words, we continue to expect USD to trade sideways for now even though the rapid decrease in volatility suggests a 107.00/109.50 range is likely enough to contain the price action for the next week or so (we previously expected a broad 105.50/109.50 range).