EUR/USD: Neutral (since 06 Feb 18, 1.2375): Outlook for EUR is negative, odds for further weakness to 1.2204 have increased.
We highlighted yesterday that the mild downward pressure in EUR would increase further unless it can reclaim 1.2435. EUR slipped further in overnight trading and is pressuring the solid 1.2275 support at the time of writing. Downward pressure has clearly improved and the odds for further weakness towards the month-to-date low of 1.2204 have increased considerably. Looking further ahead, a clear break below 1.2204 would indicate that EUR has moved into a bearish phase. For now, we hold a ‘negative’ outlook for EUR unless it can move back above 1.2400 within the next few days. On a shorter-term note, 1.2360 is already a strong resistance.
GBP/USD: Weakened undertone could lead to further weakness towards 1.3860.
GBP traded in a choppy manner yesterday, swinging from a low of 1.3905 to 1.4008 before plummeting back down to the current level of 1.3915. While Neutral (since 30 Jan 18, 1.4075): Pressure shift to the downside, could lead to further weakness to 1.3764. In the Chart of the Day update on Tuesday (20 Feb, spot at 1.4000), we were of the view that the consolidation phase “could last for last for a while more”. The sharp drop yesterday that cracked the bottom of the expected 1.3920/1.4200 consolidation phase came as a surprise and has shifted the immediate pressure to the downside. In other words, the outlook for GBP has turned negative and this could lead to further weakness towards the 1.3764 low seen earlier this month. Only a move back above 1.4020 would indicate that the immediate downward pressure has eased.
AUD/USD: Neutral (since 15 Feb 18, 0.7925): Weakened undertone could lead to a test of 0.7730.
After trading mostly sideways for several days, the sharp and abrupt decline yesterday that sliced through the 0.7820 support was unexpected. While it is too early to expect that AUD has moved into a bearish phase, the undertone has weakened considerably and this could lead to a test of the solid support at 0.7730 (the month-to-date low near 0.7760 is acting as a strong intervening support). Overall, we expect AUD to stay under pressure, at least for the next several days unless it can reclaim 0.7910.
NZD/USD: Neutral (since 05 Feb 18, 0.7280): Potential double-top forming. There is not much to add to the update from yesterday (reproduced below). The key resistance remains at 0.7435/40 but on a shorter-term note, 0.7390 is already a formidable level.
We highlighted on Monday (19 Feb, spot at 0.7385) that while upward momentum has improved considerably, only a “NY closing above 0.7435/40” would indicate the start of a bullish phase. NZD has since retreated and the recent price action appears to be forming a potential ‘double-top’ (note that last week’s 0.7437 peak matches the high in January). For now, downward momentum is not strong but the longer NZD stays below the critical 0.7435/40 level, the higher the risk of a deeper down-move. On the downside, 0.7270 is acting as a strong support and a break of this level could potentially lead to a sharp and rapid decline towards the key ‘neck-line’ support at 0.7176.
USD/JPY: Neutral (since 21 Feb 18, 107.35): USD has moved into a consolidation range.
We just shifted from a bearish to neutral stance yesterday and there is no change to the view. USD has likely moved into a consolidation phase and is expected to trade sideways for now, likely within a broad 106.30/108.50 range.