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 EUR dropped to 1.0995/00 last Friday (lowest level seen this month), downward momentum is far from impulsive and it is doubtful that this pair would accelerate lower from here. However, looking further ahead, a move to 1.0820 cannot be ruled out just yet as long as 1.1185 is intact. In the meanwhile, further short-term sideway trading above the recent 1.0909 low seems likely and only a clear break below this level would indicate that the next bearish leg lower has started.

GBP/USD: Bearish: To take partial profit at 1.2700.

While downward momentum continues show signs of weakening, only a move above 1.3150 would indicate that a short-term low is in place. Until then, another leg lower to 1.2700 cannot be ruled out just yet even though the odds for such a move would continue to diminish with further consolidation above the recent low of 1.2795/00.

AUD/USD: Bullish: Target 0.7600 followed by 0.7650.

The break above 0.7560 last Friday bodes well for our bullish AUD view and we continue to target a move to 0.7600 followed by 0.7650. 

NZD/USD: Shift from neutral to bullish: Target 0.7360.

The clear break above 0.7280 and the strong daily and weekly closing last Friday suggests that the outlook for NZD has shifted to bullish once again. From here, the immediate target is for a move to 0.7360.

USD/JPY: Neutral: Room to retest 99.05/10. [No change in view].

The downward pressure is still on the downside and as indicated yesterday, a retest of the post-Brexit low of 99.05/10 would not be surprising. That said, downward momentum is patchy at best and a sustained break below 99.05/10 seems unlikely. Only move back above 101.60 would indicate that the downward pressure has eased.

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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. [No change in view].

While EUR dropped to 1.0995/00 last Friday (lowest level seen this month), downward momentum is far from impulsive and it is doubtful that this pair would accelerate lower from here. However, looking further ahead, a move to 1.0820 cannot be ruled out just yet as long as the stop-loss at 1.1185 is intact. In the meanwhile, further short-term sideway trading above the recent 1.0909 low seems likely and only a clear break below this level would indicate that the next bearish leg lower has started.

GBP/USD: Bearish: Increasing risk of an interim low.

We highlighted that downward momentum has weaken in the past few updates and from here, the risk of an interim low is growing. Those who are shorts after Brexit  may like to book partial profit at current level. 

AUD/USD: Bullish: Target 0.7600 followed by 0.7650.

There is no change to the current bullish AUD view. The decline yesterday is likely a short-term corrective pull-back and further AUD strength to 0.7600, 0.7650 is still expected. Stop-loss remains unchanged at 0.7440 even though 0.7500 is already a strong short-term support.

NZD/USD: Bullish: Target 0.7360.

We just turned bullish and the subsequent sharp drop from the high of 0.7306 does not bode well for our view. However, only a break below 0.7200 would indicate that our bullish expectation is wrong.

USD/JPY: Neutral: Bullish only if daily closing above 103.50.

While we highlighted the waning downward pressure in USD, the strong and abrupt rally yesterday was clearly unexpected. Upward momentum is picking up rapidly but only a daily closing above 103.50 would indicate that the current neutral phase has shifted to bullish. Overall, the upward pressure would continue to increase unless there is move back below 101.50.

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

EUR/USD: Bearish: Time running out for EUR bears, need to break below 1.0995/00 in these two days.

While the outlook for EUR is still viewed as bearish with a stop-loss at 1.1185, time is running out for bears as the current prolonged consolidation has resulted in a rapid loss in downward momentum. This pair has to move and stay below 1.0995/00 in these two days or the outlook for EUR would shift to neutral. Support below 1.0995/00 is at 1.0909 and the ideal target at 1.0820 seems to be slipping away

GBP/USD: *Shift from bearish to neutral: Recovery could extend higher to 1.3535.

We highlighted the increasing risk of an interim low yesterday and suggested profit-taking for those who are short. However, the rebound was much stronger and faster than expected. The current movement is viewed as a correction for now even though the recovery could extend higher to 1.3535 in the coming days. Overall, this pair is expected to remain supported unless there is a move back below 1.3050 with 1.3150 acting as a strong shorter-term support.

AUD/USD: Bullish: To take partial profit at 0.7700.

The bullish phase that started last Tuesday has exceeded not only the immediate 0.7600 target but also the post-Brexit high of 0.7650 (overnight high of 0.7658). The rally appears to have enough momentum to extend further and the next significant resistance is at the early May high of 0.7720 (prior to RBA’s rate cut). This is a major level and is expected to attract strong selling interest and as such, those who are long from last week may like to square at least half of their long on any approach to 0.7700. 

NZD/USD: Bullish: Target 0.7360.

After dropping precariously close to the stop-loss at 0.7200 (low of 0.7207), NZD rallied strongly to make a fresh high of 0.7325. The outlook remains bullish and we continue to target a move to 0.7360. Stop-loss remains unchanged at 0.7200 for now even though 0.7230 should be strong enough to hold any short-term pull-back.

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

EUR/USD: Shift from bearish to neutral: In a 1.0995/1.1200 range.

Time has run out for our bearish view and we are shifting to a neutral stance from here. We expect to see further sideway trading, likely between 1.0995 and 1.1200 even though the near-term bias is for a stronger rebound. However, at this stage, a move above 1.1200 seems unlikely

GBP/USD: Neutral: Recovery could extend higher to 1.3535.

We shifted to a neutral stance on Wednesday  and were of the view that GBP is in a corrective recovery which has room to extend higher to 1.3535. The anticipated up-move has been more rapid and impulsive than expected and a move above 1.3535 could lead to extension to 1.3600. While the prospect for such a move is not high, it has clearly improved considerably. Overall, GBP is expected to stay underpinned with support at 1.3250 followed by the now very strong level at 1.3150.

AUD/USD: Bullish: To take partial profit at 0.7700.

The bullish AUD phase is still intact and the current movement is viewed as a short-term consolidation phase. However, there are some early signs that upward momentum is slowing and those who are long from last Tuesday should continue to book partial profit on any move to 0.7700.

NZD/USD: Shift from bullish to neutral: Pull-back could extend to 0.7080.

The bullish phase ended abruptly as NZD plunged below the 0.7200 stop-loss. The recent wild swings have resulted in a mixed outlook and we are neutral now. However, the nearterm risk appears to be on the downside, and the current pull-back could extend lower to 0.7080. At this stage, a sustained move below this level is not expected. Overall, this pair is expected to remain under pressure in the coming days unless it can move above 0.7230.

USD/JPY: Bullish: Above 106.00 would shift focus to 106.80.

The anticipated USD strength has been more rapid and certainly move impulsive than expected. The break above 106.00 shifts the focus to 106.80, the high seen on the day of Brexit.

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EUR/USD: Rangy; GBP/USD: Sequeeze Risk; USD/JPY: Patience Needed

In the week ahead, the European PMIs is where we could start to see some lousy data, as both M1 and equity market signal a fall maybe even larger than the consensus expects (manufacturing PMI from 52.8 to 52). Ditto, the credit data is going to worsen. Note, the EUR is no longer  a “safe haven” as it used to be, as EURUSD correlation with equities positive again.

We have to see longer yields rising (the US Treasury, too) to see the EURUSD higher. Until then, I still think it’s a range, with the downside limited to 1.08.

The GBP? Everyone is bearish GBP, and I get it. Short term, global equities falling is GBP negative. And there is no particular reason to expect a miraculous UK recovery.

But every single person I talk to is GBP bearish. Every. So I am afraid, we end up on the road of GBP-short squeezes like during the European crisis, should e.g. UK data turn out NOT as ugly, the BoE does NOT cut rates in August, oil does NOT collapse like in 2015 or 2014...

No, Japan won't do helicopter money yet (or they, and other major central banks, have already been doing it for years now?). In any case, fiscal stimulus is highly JPY negative - and risk positive, as I argued over the past few months. Government's plans to do fiscal easing in tune of 4%/GDP alongside the monetary easing, even in the current size, should push the JPY weaker going forward.

Near term, patience: I think we could get better levels to be short JPY, as the Pokemon craze cools off.

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

EUR/USD: Neutral: In a 1.0995/1.1200 range.

EUR traded in a narrow range of less than 50 pips yesterday, the tightest we have seen since Brexit. The outlook in the days ahead remains unclear and we continue to hold a neutral view for now. Only a clear break out of the expected 1.0995/1.1200 range would possibly lead to a sustained directional move.

GBP/USD: Neutral: In a 1.3100/1.3500 range.

The recent pick-up in short-term upward momentum has fizzled out. Last week’s 1.3480 high is acting as a very strong resistance now and a sustained move above this level is unlikely. To put it another way, while the outlook for next week or so is still viewed as neutral, the short-term upward pressure has eased and GBP is more likely to trade sideways instead of extending higher. Expected range from here, 1.3100/1.3500.

AUD/USD: Shift from bullish to bullish to neutral: Pull-back has room to extend lower to 0.7445.

AUD is dropping rapidly at the time of writing. In other words, the bullish phase that started 2 weeks has ended. The current movement is viewed as a corrective pull-back which has scope to extend lower to 0.7455. Unless the current decline were to accelerate lower in an impulsive manner, a sustained move below 0.7455 seems unlikely for now. Overall, AUD is expected to stay under pressure in the coming days as long as it stays below 0.7630.

NZD/USD: Shift from neutral to bearish: Immediate target at 0.6975

As highlighted yesterday, a clear break of 0.7080 or daily closing below this level would shift the outlook for NZD to bearish. The immediate target is at 0.6975 followed by 0.6900.

USD/JPY: Bullish: To take profit at 106.60. [No change in view]

While the 106.00 target that was first highlighted last Wednesday was exceeded, USD dropped sharply after touching a high of 106.30. As mentioned previously, the next resistance above 106.00 is at the 106.80 high seen on the day of Brexit. That said, the pullback has dented the recent impulsive momentum and those who are long should look to book partial profit at 106.60, ahead of the major 106.80 level.

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

EUR/USD: Neutral: Bearish if daily closing below 1.1095.

EUR tested the 1.0995/00 support yesterday but failed to break through (low of 1.0998). Downward momentum has improved considerably and a daily closing below this key support would indicate that the outlook for EUR has shifted to bearish again (with an immediate target of 1.0905/10 followed by 1.0820). Overall, EUR is expected to remain under pressure from here unless it can move back above 1.1120 within the next 1 to 2 days.

GBP/USD: Neutral: In a 1.2960/1.3320 range.

While we were of the view that the recent short-term upward momentum has fizzled out, the pull-back has been more resilient than expected. From here, a move below the strong 1.3100 support would not be surprising but we continue to view the current movement as part of a broader neutral sideway consolidation and not a resumption of the recent bearish phase. That said, the expected consolidation has shifted to a lower range of 1.2960/1.3320.

AUD/USD: Neutral: Pull-back has room to extend lower to 0.7445.

We shifted to a neutral stance yesterday and there is no change to the view. The current pull-back appears to have room to extend lower to 0.7445 (with lower odds for further extension to 0.7400). Overall, this pair is expected to stay under pressure in the next several days unless it can reclaim 0.7605 (0.7560 is already a strong short-term resistance).

NZD/USD: Bearish: Immediate target at 0.6975.

There is no change to current bearish outlook in NZD. The immediate target is at 0.6975 with a stop-loss at 0.7125. On a shorter-term note, the recent sharp drop is oversold and this may lead to a couple of days of consolidation first (before moving lower again).

USD/JPY: Bullish: To take profit at 106.60.

As pointed out in the “24-hour view” update; while USD made a fresh high of 106.52 high yesterday, the price action appears to be a topping process and the risk of a short-term peak is increasing. Those who are long from last week should continue to look to take profit at 106.60 (ahead of the 106.80 high seen on the day of Brexit)

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

EUR/USD: Neutral: Bearish if daily closing below 1.1095.

EUR dipped to a low of 1.0979 but closed well above the key level of 1.1095. As indicated yesterday, while downward momentum has improved considerably, only a daily closing below 1.1095 would indicate that a move towards 1.0905/10, 1.0820 has started. This scenario still seems likely unless EUR can move back above 1.1120 from here.

GBP/USD: Neutral: In a 1.2960/1.3320 range.

GBP touched a low of 1.3065 yesterday but rebounded quickly. The outlook for this pair is still viewed as neutral and the current movement is likely part of a broader consolidation phase. In other, words, we continue to expect choppy trading within a broad 1.2960/1.3320 range.

AUD/USD: Neutral: Pull-back has room to extend lower to 0.7445.

We shifted to a neutral stance on Tuesday and expected the current pull-back in AUD to extend lower to 0.7445. The price action is line with our expectation but the down-move has been more rapid than expected and a clear break below 0.7445 would greatly increase the odds for further decline to 0.7400, possibly to 0.7330. Overall, this pair is expected to stay under pressure unless it can reclaim 0.7560. On a shorter-term note, 0.7530 is already a strong resistance.

NZD/USD: Bearish: Next target at 0.6895.

The 0.6975 highlighted on Tuesday was exceeded as NZD dropped sharply to a low of 0.6952 early this morning (after RBNZ’s statement). With no signs of stabilization just yet, the focus is for further NZD weakness to 0.6895.

USD/JPY: Bullish: Clear break of 106.80 could lead to acceleration higher.

The ease of which the major 106.80 resistance (high on the day of Brexit) was taken out bodes well for the current bullish USD view. The bullish phase started last week when USD broke above the minor trend-line resistance. At the time of writing, USD has breached the major falling trend-line connecting the late January 121.68 high and the late May high of 114.43. Upward momentum is strong and impulsive and with the next significant resistance more than 200 pips higher from current level (at 109.60), USD could continue to accelerate higher in the coming days. In order to maintain the impulsive momentum, any short-term pull-back should not move back below 105.80.

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Draghi Unmoved: Opportunities in EUR/USD and EUR/JPY?

The European Central Bank overnight, kept interest rates on hold at zero as expected.

But with the whirlwind of uncertainty that surrounds a post-Brexit Eurozone including stubbornly low growth and a struggling Italian banking system, Draghi’s press conference was, as always a media gold mine, that kept markets hanging on his every word.

Speaking of Brexit, it’s looking like the ECB isn’t too perturbed by it:

“Euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience.”

While Draghi continues to make it clear that they are willing and able to deal with any shocks that may arise as the UK continues to negotiate its full exit strategy, conditions are holding steady for now. A point that could be perceived as being very EUR positive.

Positivity that spurred Draghi on in speaking about the resilience that the EU economy has displayed recently, as well as the upbeat prospects they expect heading forward. Less QE? Well, he did hold short of giving away the bank’s plans for more stimulus, but spoke about possibly having to change the criteria for the type of bonds that they can buy… because essentially they are running out. Ha!

But what about the 360 billion Euros of bad loans bloating the balance sheets of Italian banks, and the prospect of more bailouts being needed if momentum starts to take hold now we’ve started sliding down the slippery slope?

“Some steps have been undertaken in Italy.”

The EU has implemented rules that mean it’s the shareholders and owners of bond debt that must take the initial hit if push comes to shove, rather than the taxpayer. What this will do to confidence in the system is still unknown and the worry is that it will still hit the everyday taxpayer at the end of the day when things fall apart anyway!

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EUR/USD:  Bearish, immediate target at 1.0905/10 with decent odd of extending to 1.0820.

The daily closing below 1.0995 indicates that EUR has started on a move lower to 1.0905/10 (low on the day of Brexit) with decent odds of extending further to 1.0820 (low in early March). The bearish phase just started and in order to maintain the current momentum, any short-term rebound should not move back above 1.1040.

GBP/USD: Neutral: In a 1.2960/1.3320 range.

The choppy trading over the last several trading days has resulted in a mixed outlook for GBP. We continue to hold a neutral view and expect this pair to trade in a broad 1.2960/1.3320 range for now.

AUD/USD: Neutral: Pull-back has room to extend further 0.7400.

We shifted to a neutral stance last Tuesday and expected the pull-back in AUD to extend lower to 0.7445. While this level was tested and held last Friday with a low of 0.7443, the immediate pressure is still on the downside and further decline towards the next major support at 0.7400 would not be surprising. Overall, this pair is expected to remain under pressure unless it can reclaim the strong 0.7530 resistance.

NZD/USD: Bearish: Next target at 0.6895.

The outlook for NZD remains bearish and we continue to expect further decline to the next target at 0.6895. 

USD/JPY: Neutral: In a 104.50/107.50 range.

We turned neutral USD last Friday and there is no change to the view. The near-term outlook remains unclear and we continue to expect broad choppy trading, likely within a 104.50/107.50 range (adjusted higher from 104.00/107.00 last Friday).