FOREX Tech Targets

EUR/USD: Bearish (13 Aug 18, 1.1400): Room for further weakness in the coming days.

We have held the same view since Monday (13 Aug, spot at 1.1400) that there is “room for further weakness” in EUR and the price action since then coincides with our expectation. EUR dipped to an overnight low of 1.1297 and as highlighted yesterday (15 Aug), the next ‘target’ at 1.1285 is likely within reach this week. That said, short-term indicators are at severely ‘oversold’ levels and this coupled with signs of momentum waning could lead to a couple of days of consolidation first. In other words, we do not expect the next major support at 1.1185 to come into the picture so soon. On the upside, the current ‘stop-loss’ level remains at 1.1460 even though 1.1430 is likely strong enough to cap any bounce in EUR within the next couple of days.

GBP/USD: Bearish (since 09 Aug, spot at 1.2885): Still bearish but risk of an interim low has increased.

We have been bearish GBP since late last week (see update on 10 Aug, spot at 1.2825) and highlighted on Monday (13 Aug, spot at 1.2760) that “the revised ‘target’ of 1.2675 appears to be within reach sometimes this week”. In line with expectation, the ‘target’ was exceeded in overnight trading as GBP dropped to a low of 1.2662. While the outlook is still clearly bearish, GBP has moved deeper into oversold territory and the risk of an interim low has increased. However, only a break of 1.2840 (no change in the ‘stop-loss’ level) would indicate that a low is in place. Shorter-term, a move above 1.2780 would further increase the risk of an interim low. To put it another way, GBP has to ‘punch’ and hold below the near-term support at 1.2645 within these 1 to 2 days or the next ‘target’ at 1.2590 could be out of reach this time round.AUD/USD: Bearish (since 13 Aug 18, spot at 0.7285): Immediate target exceeded, AUD could consolidate for a few days first.

The immediate ‘target’ of 0.7220 that was first highlighted on Monday (13 Aug, spot at 0.7285) was exceeded as AUD reached a low of 0.7203 yesterday (15 Aug). Despite the relatively strong bounce from the low, we continue to see chance for AUD to weaken further to the next ‘target’ at 0.7160. However, oversold short-term indicators suggest AUD could consolidate for a few days first before staging the next down-leg. On the upside, only a break of 0.7330 (‘stop-loss’ level unchanged) would indicate that the current bearish phase has ended.

NZD/USD: Bearish (since 10 Aug 18, spot at 0.6610): Odds for a sustained move below 0.6540 are not high.

NZD edged lower and touched a fresh low of 0.6545 yesterday, just above the strong 0.6540 support that we have highlighted in recent updates. As indicated yesterday, while we did not detect any significant improvement in downward momentum, there is still scope for NZD to reach 0.6540. That said, the combination of oversold conditions and lackluster momentum suggest that the odds for further extension to the next ‘target’ at 0.6490 are not high. On the upside, a break of 0.6630 (‘stop-loss’ unchanged) would indicate that NZD has made a short-term bottom.

USD/JPY: Neutral (since 23 Jul 18, 111.20): Outlook unclear, USD likely trading in a broad range.

The price action in USD continues to confound us as it surrendered most of the gains made over the past two days. Note that USD rebounded strongly from a low of 110.10 Monday (13 Aug) and hit a high of 111.42 yesterday (15 Aug) before dropping sharply and closed at 110.73 in NY (-0.36%). As highlighted yesterday, the outlook is unclear and it appears that USD is trading in a broad range now. After yesterday’s price action, the expected range is likely lower between 109.85 and 111.50 (instead of 110.30/112.20 as expected previously).