Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY – August 8

The US Dollar lost some ground as trade tensions eased. What’s next for major currency pairs? Here are the levels to watch according to 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 a likely. No change in view. A break of 1.1640 would indicate that the recent downward pressure has eased.

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. No change in view.

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): Positive price action but AUD would likely struggle to extend its gains.

AUD staged a relatively strong recovery yesterday as it hit 0.7740, just one pip below the 3-week high of 0.7441. While the price action is clearly positive for AUD, those who are anticipating a higher AUD should not get too ‘excited’ as several strong resistance levels are stacked closely together above 0.7440, namely at 0.7465, 0.7485 and the critical level of 0.7500. While upward momentum has improved somewhat, AUD would likely struggle to break these strong resistance levels. Overall, we expect AUD to stay mildly supportive for now as long as it can hold above 0.7370 within the next few days.

NZD/USD:  Neutral (since 06 Jul, 0.6795): A fresh year-to-date low seems likely.

NZD traded within a narrow range yesterday before ending the day largely unchanged (NY close of 0.6734, +0.01%). We continue to see a chance for NZD dipping below the year-to-date low of 0.6688 but at this stage, it is unclear whether NZD can break below the major longterm support zone at 0.6670/80. Only a break of the ‘key resistance’ at 0.6810 would indicate the current downward pressure has eased.

USD/JPY: Neutral (since 23 Jul 18, 111.20): USD is still in a consolidation phase.

USD dipped to a low of 110.98 but recovered quickly to end the day little changed at 111.37 (-0.02%). We continue to view the current movement as part of a consolidation phase and expect USD to trade sideways, likely within a 110.60/112.20 range

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