Forex Tech Targets

EUR/USD: Shift from bullish to NEUTRAL: EUR has moved into a correction phase.

We highlighted yesterday that “a break of 1.2380 would serve as a pre-indication that a top is in place”. EUR took out this level without much difficulty as it plummeted to an overnight low of 1.2361. The subsequent weak daily closing in NY is enough to indicate that the bullish phase that started more than 3 weeks ago (15 Jan, spot at 1.2195) has ended. The current movement is viewed as the start of a correction phase and the pull-back in EUR has room to extend lower towards 1.2300. The high of 1.2475 registered yesterday is expected to be strong enough to cap any short-term EUR strength, at least for the next one week or so.

GBP/USD: Neutral (since 30 Jan 18, 1.4075): Pull-back has room to extend lower.

We highlighted the weak undertone in GBP yesterday and were of the view that this could lead to a “test of last week’s 1.3980 low”. However, the pace of the decline was more rapid than expected as GBP plummeted to an overnight low of 1.3953. In view of the strong rally from the 1.3458 low in mid-January, the current pull-back is still viewed as part of a neutral correction. That said, the pull-back has room to extend further towards 1.3800. A clear break of this level would indicate that the January’s peak of 1.4346 is a more important top than currently expected. On the upside, only a move back above 1.4100 would indicate that the immediate downward pressure has eased.

AUD/USD: Neutral (since 02 Feb 18, 0.8040): Bearish if NY closing is below 0.7860. No change in view.While the shift to a neutral stance last Friday (02 Feb, spot at 0.8040) was timely, the subsequent outsized decline of -1.51% was clearly not expected (the -1.51% decline is the biggest 1-day drop since May last year). Despite the vastly improved downward momentum, it is too early to expect the start of a bearish phase. Only a NY closing below 0.7860 would indicate that a move towards 0.7805/10 has started. The odds for such a move are not high for now but would continue to improve unless AUD can reclaim 0.8020 in the coming days. On a shorter-term note, 0.7980 is already quite a strong level.

NZD/USD: VIEW Neutral (since 05 Feb 18, 0.7280): Scope for extension lower to 0.7220.

We just shifted from a bullish to neutral stance yesterday and there is no change to the view. The outlook for NZD is deemed as neutral even though the pull-back has scope to extend lower towards 0.7220. A clear break below this level would indicate that NZD has moved into a bearish phase. All in, NZD is expected to stay under pressure in the coming days unless it can reclaim 0.7370.

USD/JPY: Neutral (since 05 Feb 18, 110.10): USD is expected to trade sideways within a broad range.

We turned neutral on JPY yesterday and the subsequent rapid drop from a high of 110.29 came as surprise. Instead of extending its recovery to 110.80 as expected previously, USD has likely moved into a choppy and broad consolidation range. In other words, there is no change to the neutral outlook but USD is expected to trade sideways from here, likely within a broad 108.00/110.50 range.

Source:efxdata.com