Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY
EUR/USD: Neutral: In a 1.0500/1.0680 range.
We noted yesterday that “the rapid pull-back has resulted in a slight negative undertone” and the relatively weak daily closing suggests that the downward pressure has increased further. That said, 1.0500 is a rather strong support and only a ‘sharp and rapid’ break below this level would indicate that EUR has entered a bearish phase. From here, the downward pressure would continue to build unless EUR can reclaim 1.0630. On a shorter-term note, 1.0590 is already a very strong resistance.
GBP/USD: Shift from neutral to bearish: Expect further weakness to 1.2200.
While we stated on Monday that GBP has room to extend lower to 1.2345/50, the weakness is more impulsive than expected as the break of 1.2345/50 led to a sharp drop to 1.2261 at the time of writing. The decline is accompanied is strong downward momentum and we expect the current weakness to extend further to 1.2200 (rising daily trend-line support). This is a rather key level and a break could lead to acceleration lower towards the 1.1983 low seen in January.
AUD/USD: Neutral: Pull-back has room to extend lower to 0.7605, possibly 0.7570.
We shifted from a bullish to neutral stance yesterday and there is no change to the view. The pull-back from last week’s 0.7741 peak has room to extend lower to 0.7605, possibly 0.7570. At this stage, any decline is viewed as a corrective pull-back and a period of sustained weakness is not expected. Resistance is 0.7710 but AUD has to move above 0.7740 to indicate that the current short-term weakness has stabilized.
NZD/USD: Neutral: Expect further weakness to 0.7070.
The weakness in NZD was not surprising as we warned yesterday that “the risk of sustained move below 0.7130 has increased”. With no signs of stabilization just yet, further weakness towards 0.7070 seems likely. This is a major level and is expected to offer solid support. Overall, this pair is expected to stay under pressure unless it can reclaim 0.7200. On a shorter-term note, 0.7170 is already a strong resistance.
USD/JPY: Neutral: Rebound has room to extend to 114.95.
While USD is holding just below the expected 112.00/114.20 consolidation range indicated yesterday, the rapid pace of the rebound suggests that extension towards 114.95 would not be surprising. This is a rather strong resistance and is unlikely to yield so easily. All in, the current positive undertone is expected to stay intact unless there is a move back below 112.70 (minor support at 113.35).