Setups: EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, USD/CAD

EUR/USD: Our bearish view was encouraged by Friday’s low close. We are looking for a move back towards Friday’s 1.0910 lows and then towards a swing target near 1.0840. Beyond there we are looking towards the 1.0710 area.

USD/JPY: We are bearish and would prefer to fade upticks towards the 103.55 former range lows. Our targets are back to Friday’s 99.00 lows and further out towards the 94.80 area.

GBP/USD: We are bearish. Friday’s high volume sell-off points lower. We expect a move towards our targets near 1.3015 and then the 1.2750 area.

 
AUD/USD: Friday’s key reversal day encourages our bearish view. We look for a move below initial targets near 0.7285 to signal lower towards the 0.7145 lows.

NZD/USD: We have turned bearish following Friday’s reversal candle. A move below 0.6960, our initial targets would point lower towards 0.6890 and then the 0.6810 area.

USD/CAD: We prefer to fade upticks towards 1.3190 and look for a move below targets near 1.2655 to signal lower towards the 1.2460 year-to-date lows.

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The following are BMO's latest forecasts for EUR/USD, USD/JPY, GBP/USD, USD/CAD and EUR/JPY.

Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY

EUR/USD: Bearish: Room to extend lower but 1.0820 is a major support.

The rapid decrease in volatility was surprising but the overall undertone for EUR is still negative and we continue to target a move to the major level of 1.0820. However, this is a very strong support and may not be easy to crack.

GBP/USD: Bearish: A move to 1.3000 would not be surprising.

As highlighted yesterday, 1.3225/30 is a tenuous support and a break of this level would shift the focus to 1.3000. GBP dropped rapidly to an overnight low of 1.3122 but overextended short-term indicators could slow down the pace of any further decline. Overall, we continue to expect the current GBP weakness to extend to 1.3000. 

AUD/USD: Neutral: Expect choppy trading between 0.7305/0.7510.

While the pull-back from last Friday’s 0.7650 peak is picking up momentum, only a drop below 0.7305 support would indicate a sustained AUD weakness in the coming days. For now, we hold a neutral view and expect this pair to trade within 0.7305/0.7510 range. That said, downward pressure would continue to increase unless there is a move back above 0.7510 within these few days.

NZD/USD: Neutral: In a broad 0.6975/0.7170 range.

Similar to AUD/USD, the pull-back from last Friday’s 0.7305 high is picking up momentum but only a clear break below 0.6975 would indicate that NZD is ready to head lower towards 0.6920 and beyond. In the meanwhile, we hold a neutral view but unless this pair can reclaim 0.7170, the downside risk would continue to increase.

USD/JPY: Neutral: In a broad 100.00/105.00 range.

After registering a whopping 770 pips range last Friday, USD settled down quickly and traded in a surprisingly narrow range of 101.37/102.46 yesterday. However, the outlook for USD from here is still unclear and a sudden pickup in volatility cannot be ruled out just yet. That said, we believe 100.00/105.00 should be enough to contain the price action over the next several days.

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EUR/USD: USD/JPY, USD/CAD: Post-Brexit Views & Targets

EUR/USD. We are adjusting our EUR/USD forecasts in line with what we communicated before and immediately after Brexit. We now forecast EUR/USD at 1.09 in 1M (1.11 previously), 1.07 (1.10) in 3M, 1.10 (1.14) in 6M and 1.14 (1.18) in 12M. Short-term, we expect increased political uncertainty in the eurozone and the prospects of further monetary easing to weigh on EUR/USD. However, medium-term we continue to expect that the undervaluation of the EUR and the large eurozone-US current account differential will support the EUR.

USD/JPY. We are lowering our USD/JPY forecasts to 105 in 1M (108 previously), 107 in 3M (112), 108 in 6M (112) and 108 in 12M (112). Brexit and our call that the Fed will now be on hold for the rest of 2016 imply that there is less room for USD/JPY to move higher. We continue to expect that BoJ will ease aggressively in July by cutting interest rates by 20bp and to announce additional quantitative easing. In addition, the risks of FX intervention are increasing. Hence, we expect USD/JPY to edge higher on 0-3M and stabilise medium-term.

USD/CAD: We still expect the fundamentally undervalued ‘loonie’ to gradually appreciate over the coming year on the back of valuation, a gradually higher oil price, markets re-pricing BoC monetary policy and a generally improved growth outlook in North America. On the back of the decline in oil prices and with the outlook of more short-term USD strength we lift our forecast profile to 1.33 in 1M (from 1.31), 1.31 in 3M (1.28), 1.28 in 6M (1.26) and 1.25 in 12M (1.24).

Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY

EUR/USD: Bearish: Room to extend lower but 1.0820 is a major support.

There is no change to the bearish EUR view; the current movement is viewed as a short-term consolidation phase which should lead to further EUR weakness towards 1.0820 in the coming days

GBP/USD: Bearish: A move to 1.3000 would not be surprising.

The short-term GBP strength is viewed as a corrective rebound and it is too early to expect a sustained recovery. Trading is expected to remain volatile but at this stage, we do not see GBP moving back above the stop-loss for our bearish view at 1.3785. This level is expected to move lower if the current volatility abates further. Target remains unchanged at 1.3000 even though Monday’s low of 1.3120/25 is acting as a strong intermediate support.

AUD/USD: Neutral: Expect choppy trading between 0.7305/0.7510. [No change in view]

While the pull-back from last Friday’s 0.7650 peak is picking up momentum, only a drop below 0.7305 support would indicate a sustained AUD weakness in the coming days. For now, we hold a neutral view and expect this pair to trade within 0.7305/0.7510 range. That said, downward pressure would continue to increase unless there is a move back above 0.7510 within these few days.

NZF/USD: Neutral: In a broad 0.6975/0.7170 range. [No change in view]

Similar to AUD/USD, the pull-back from last Friday’s 0.7305 high is picking up momentum but only a clear break below 0.6975 would indicate that NZD is ready to head lower towards 0.6920 and beyond. In the meanwhile, we hold a neutral view but unless this pair can reclaim 0.7170, the downside risk would continue to increase.

USD/JPY: Neutral: In a broad 100.00/105.00 range.

There is not much to add as the near-term outlook is still unclear after the outsized range last Friday. For now, it seems hat 100.00/105.00 should be enough to contain the short-term market volatility for the next several days.

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Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY

EUR/USD: Bearish: Room to extend lower but 1.0820 is a major support.

While the rebound from last Friday’s 1.0909 low has been more resilient than expected, there is no change to the bearish outlook for EUR. The current price action is viewed as a corrective rebound and as long as 1.0210 is not taken out, a move to 1.0820 cannot be ruled out just yet.

GBP/USD: Bearish: A move to 1.3000 would not be surprising. [No change in view]

The short-term GBP strength is viewed as a corrective rebound and it is too early to expect a sustained recovery. Trading is expected to remain volatile but at this stage, we do not see GBP moving back above the stop-loss for our bearish view at 1.3785. This level is expected to move lower if the current volatility abates further. Target remains unchanged at 1.3000 even though Monday’s low of 1.3120/25 is acting as a strong intermediate support.

AUD/USD: Neutral: Expect choppy trading between 0.7305/0.7510.

AUD is rebounding quickly from the 0.7325 low seen on Monday. While the up-move appears to have scope to extend higher and test the strong 0.7510 resistance, a clear break above this level is not expected. In other words, we are holding on to our neutral view for now and expect AUD to continue to trade choppily within a 0.7305/0.7510 range.

NZD/USD: Neutral: In a broad 0.6975/0.7170 range.

NZD came close to the major 0.6975 support on Monday (low of 0.6971) but rebounded sharply. The up-move is viewed as part of a broader consolidation and not the start of a sustained rally. That said, a test of the major resistance at 0.7170 would not be surprising. Overall, we continue to hold a neutral view and expect further range trading between 0.6975/0.7170.

USD/JPY: Neutral: In a broad 100.00/105.00 range. [No change in view]

There is not much to add as the near-term outlook is still unclear after the outsized range last Friday. For now, it seems that 100.00/105.00 should be enough to contain the short-term market volatility for the next several day.

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Setups: EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, USD/CAD

EUR/USD: Upticks are seen as an opportunity to sell at better levels. We are bearish and look for a move lower towards initial targets near Friday’s 1.0910 lows and then the 1.0840 area. Beyond there we are looking towards 1.0710.

USD/JPY: We prefer to fade upticks towards the 103.55 former range lows and look for a break below initial targets near 101.45 to signal lower towards last Friday’s 99.00 lows.

GBP/USD: While the former multi-year lows near 1.3505 cap the daily close, we are staying bearish. Our downside targets are towards 1.3015 and then the 1.2750 area. 

AUD/USD: We prefer to use upticks towards 0.7520 as an opportunity to sell at better levels. A move below our initial targets near 0.7285 would signal lower towards the 0.7145 lows.

NZD/USD: We look to fade upticks in range towards resistance near 0.7175 and look for a move below our initial targets near 0.6960 to confirm downside traction. Our next targets are towards the 0.6810 area.

USD/CAD: We are bearish against the 1.3190 highs and look for a move lower in range towards initial targets near 1.2830 and 1.2755. A move below our next targets near 1.2655 would signal lower towards the 1.2460 year-to-date lows.

The Euro to US Dollar Pair's Outlook in the Week Ahead

The charts are showing the euro is vulnerable to another sell-off versus the dollar in the coming week, although fundamentally analysts see euro weakness limited, so the main driver could be dollar strength

The EUR/USD pair broke down out of a long-term rising channel following the Brexit referendum result over fears about the integrity of the European Union.

It has since recovered back up to the lower channel line roughly at the level of its break.

On Thursday it was buoyed by an higher-than-expected inflation reading and on Friday a rose due to a tick down in Eurozone Unemployment.

This may be what technicians call a ‘throwback’ or ‘return move’ – a pull-back into the level the exchange rate has just broken below or above.

This is normally followed by a last ‘air kiss’ goodbye before the rate resumes falling or rising in the direction dictated by the breakout.

In the case of EUR/USD this would indicate the probability of a bearish resumption starting next week, and the exchange rate moving lower again.

The next major target to the downside is the S1 monthly pivot at 1.0868, a level which prices tend to respect and traders use to trade counter-trend, therefore stalling directional moves.

A break below the 1.1000 level might provide compelling confirmation of a resumption lower, although positions could be built up slowly earlier, as the pair fell.

The height of the channel gives a fairly reliable target for the break, and this channel is 6 cents high, indicating a potential 6 cent break lower, which from the original breach at 1.12 gives an eventual target at 1.06 – attractively near the range’s mega-long-term lows.   

As such, it is possible the pair could fall all the way to the 1.06s in time.

Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY

EUR/USD: Bearish: Room to extend lower but 1.0820 is a major support.

The current short-term consolidation/correction phase is taking longer than expected as EUR continues to hold above the 1.1095/00 support. Downward momentum is beginning to show signs of slowing but as long as 1.1210 is intact, we are not giving up on our bearish view just yet. That said, the prospect for a sustained down-move has clearly dimmed and EUR has to move and stay below 1.1095 within these couple of days or the risk of an interim low would continue to increase.

GBP/USD: Bearish: A move to 1.3000 would not be surprising.

GBP spent another day trading in a relatively narrow range and the strong downward momentum after Brexit is showing further signs of slowing. That said, another leg lower to the 1.3000 target cannot be ruled out just yet. 

AUD/USD: Shift from neutral to bullish: Target 0.7600 followed by 0.7650.

As highlighted yesterday, a daily closing above 0.7510 would shift the outlook for AUD to bullish. The immediate target is at 0.7600 followed by the post-Brexit high of 0.7650. 

NZD/USD: Shift from neutral to bullish: Target 0.7305.

The clear break above 0.7200 has shifted the neutral outlook to bullish. The immediate target is for a move to the post-Brexit high of 0.7305. 

USD/JPY: Neutral: In a broad 101.00/105.00 range. [No change in view].

As indicated last Friday, the recent short-term USD strength is viewed as a part of a consolidation phase and not the start of a sustained rally. The quick pull-back from the 103.39 high last Friday reinforces our current neutral view for this pair. The near-term outlook remains mixed and we expect further sideway trading, likely within a broad 101.00/105.00 range.

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Setups: EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, USD/CAD

EUR/USD: We are clinging to a bearish view. A move above resistance in the 1.1180 area would force us to turn neutral. For now, we are looking for a move lower in range towards initial targets near 1.0970 and then the 1.0910 lows. Further out, we see room towards 1.0840 and then the 1.0710 area.

USD/JPY: Friday’s bearish engulfing candle encourages our bearish view. A low close today would endorse the reversal and point towards initial targets near 101.45. A move below 101.45 opens the 99.00 lows.

GBP/USD: We are bearish against last week’s 1.3535 highs and look for a move through the 1.3120 lows to confirm downside traction. Our targets are towards 1.3015 and then the 1.2750 area.

AUD/USD: The break above resistance near 0.7520 signals a further upside squeeze before sellers emerge. We expect the 0.7650 range highs to cap a move lower towards the recent range lows near 0.7285. Beyond there, we are looking for downside towards 0.7145.

NZD/USD: We are bearish and expect the 0.7305 highs to cap upticks. We are looking for a move lower in range towards initial targets near 0.6960 towards the 0.6810 area.

USD/CAD: The move below our initial downside targets near 1.2845 encourages our bearish view towards 1.2775 and then the 1.2655 range lows. Further out, we are looking for a move to the 1.2460 year-to-date lows.

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