Currency pairs are stabilizing and looking for the next moves. What levels should we look out for? Here is the view from UOB:
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 05 Jun 18, 1.1700): A retest of 1.1500/10 support zone seems likely.
There is not much to add as EUR hit a low of 1.1527 yesterday before staging a mild recovery. As highlighted last Friday (03 Aug, spot at 1.1585), while we maintain a neutral stance, the risk has shifted to the downside and the major 1.1500/10 support zone is likely to be retested (note that EUR touched 1.1506 in May and 1.1507 in June). While the prospect for a sustained move below this major support zone is still not high, it has improved and will continue to improve unless EUR can break above the ‘key resistance’ at 1.1640 (level unchanged from yesterday). Looking further ahead, a clear break of 1.1500/10 could potentially lead to a rapid drop to the next major at 1.1365.
GBP/USD: Neutral (since 25 Jun, spot at 1.3265): Downward momentum has increased, GBP is still under pressure.
We have held the same view since last Friday (03 Aug, spot at 1.3015) wherein a “dip below the July’s 1.2958 low would not be surprising” and “the prospect for a sustained move below the next support at 1.2880 is not high”. The pace of the expected weakness in GBP has been faster than anticipated as it dropped sharply to a low of 1.2920 yesterday (Monday, 06 Aug). Downward momentum has increased further and the immediate risk is still on the downside. What is not clear is whether the current pace of weakening in GBP can be sustained. That said, we continue to expect GBP to stay under pressure until it can reclaim the ‘key resistance’ at 1.3050 (level was at 1.3100 yesterday). On the downside, support is at 1.2880 and a clear break of this strong level would greatly increase the odds for further GBP weakness towards the next major support at 1.2775.
AUD/USD: Neutral (since 05 Jul 18, 0.7380): AUD is likely caught in a broad range for now.
AUD traded within a narrow 32 pips range yesterday (between 0.7374 and 0.7406) and registered an ‘inside day’. The muted price action offers no fresh clue and we continue to hold the same view that AUD is caught in a range and is expected to trade sideways between the major levels of 0.7310 and 0.7485. On a shorter-term note, a 0.7340/0.7420 range is likely enough to contain the price action in AUD.
NZD/USD: Neutral (since 06 Jul, 0.6795): A fresh year-to-date low seems likely. No change in view.
NZD dipped to a 2-week low of 0.6721 last Friday before rebounding to end the day at 0.6748 (NY close of 0.6748, +0.10%). The mild recovery does not change our current view wherein we see risk of NZD breaking below the year-to-date low of 0.6688. At this stage, it is unclear whether any weakness in NZD can be sustained as 0.6670/80 is major long-term support zone and is unlikely to yield so easily. All in, we expect NZD to stay under pressure until it can reclaim the ‘key resistance’ that is currently at 0.6810.
USD/JPY: Neutral (since 23 Jul 18, 111.20): USD is still in a consolidation phase. No change in view.
We have held the same view since last Wednesday (01 Aug, spot at 111.80) that we are not convinced that the post-BOJ rally in USD is the start of a bullish phase. USD subsequently hit of 112.14 and has since surrendered a big part of its gains. We continue to view the current movement as part of a consolidation phase and expect USD to trade sideways, albeit likely at narrower range of 110.60/112.20 (from previous expectation of 110.60/112.50).
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