Current short term Forecast - page 12
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EUR/USD: Neutral: Downward bias but expect strong support at 1.0820/1.0845.
As highlighted yesterday, the immediate bias is tilted to the downside but 1.0820/1.0845 is a major support zone and is expected to offer solid support. Overall, this pair is expected to stay under pressure unless it can reclaim 1.1030 within the next few days.
GBP/USD: Neutral: Bullish if daily closing above 1.2550.
The undertone for GBP has improved considerably with the strong daily closing yesterday. We would turn bullish if there is a daily closing above 1.2550 (targeting a move above the 1.2625 high seen on the day of Brexit towards 1.2770). This pair is expected to stay supported unless there is move back below 1.2430.
AUD/USD: Neutral: Bearish if daily closing below 0.7550.
The 0.7568/0.7741 range yesterday was close to our expected 1 to 3 weeks consolidation range of 0.7555/0.7750. Volatility remains high but the weak daily closing has resulted in a negative undertone and a daily close below 0.7550 would indicate the start of sustained down-move (anticipating a break below 0.7505). This appears to be a likely scenario unless AUD can move and stay above 0.7700 from here.
NZD/USD: Neutral: Bearish if daily closing below 0.7180.
While we expected the corrective pull-back in NZD to extend lower, the decline has been more impulsive than expected. From here, a daily closing below 0.7180 would indicate that NZD has started on a bearish phase (targeting a move to 0.7110). Overall, NZD is expected to stay under pressure unless it can reclaim 0.7300 within these few days.
USD/JPY: Bullish: 106.50 target exceeded, focus on 107.45/50 next.
We turned bullish yesterday and the immediate target of 106.50 was quickly exceeded (overnight high of 106.94). The focus from here is at the July’s high of 107.45/50. Strong support is at 104.70 but only a move back below 103.50 would indicate that a shortterm top is in place.
Will USD Crash And Burn Next Week? Probably Not.
Given how quickly and aggressively the U.S. dollar soared since Donald Trump’s victory in the U.S. Presidential election, a correction in the coming week is likely, but chances are it will be shallow. Trump’s win was unexpected and enough of a game changer for the dollar that the gains are here to stay. Part of the reversal in fortunes for the dollar can be attributed to his spending plans and short covering but in the week ahead, it will be the prospect of a December rate hike that keeps the dollar going. U.S. stocks hit a record high providing the Federal Reserve with leeway to raise interest rates. While they won’t be happy with the rising dollar, higher yields and lower oil prices, this is the last chance for Janet Yellen to hike before the Trump Presidency -- and there’s enough justification for tightening. Raising interest rates in December would boost Yellen’s credibility and allow her breathing room to take things slowly in the new year when she will need to assess the economic impact of Trump’s policies.
The market is banking on a rate hike with Fed fund futures pricing in an 84% chance of tightening and all of the Fed Presidents who have spoken since the election have been consistently hawkish. On Friday, Vice Chair Fischer said they are close to achieving their two goals with the case of a hike relatively strong. Lacker and Williams agree and even Bullard, who tends to be one of the less hawkish members of the FOMC, believe that rates should rise, although he favors only 1 rate hike from now to the end of 2019, which seems a bit far fetched. The focus next week will be on Janet Yellen’s testimony before the Joint Economic Committee. She will almost certainly reiterate her view that rates should rise next month, which would validate the dollar’s rally and potentially send it to new highs. The dollar and stocks have performed well because Trump ran on a campaign of aggressive spending and this is the first time in 8 years that there’s prospect of a sizeable fiscal stimulus package. Fed officials have said they look forward to more government spending. His victory speech was conciliatory and heavily Keynesian, which went a long way in boosting risk appetite and lifting Treasury yields. Perhaps feeling the weight of his new responsibilities, Trump is toning down his abrasiveness and opening his ears to outside counsel. He may not have a specific plan for creating new jobs (yet), offsetting the tax cuts he plans or for finding the money for infrastructure spending outside of ballooning the deficit, but the mere promise of a fiscal stimulus program at a time when the Federal Reserve is preparing to raise interest rates reinvigorated hope for a new cycle of growth. However with Yellen not speaking until Thursday and the Dollar Index trading at its strongest level since January, a pullback in USD/JPY and the greenback in general in the front of the week is likely. U.S. retail sales and consumer prices are the main reports scheduled for release but manufacturing data and housing-market numbers are also worth watching. If USD/JPY drops to 105.50, we view this level as a great opportunity to reestablish long positions.
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EUR/USD: Shift from neutral: Immediate target of 1.0710*
We anticipated 1.0820/1.0845 to act as a major support and expected this level to at least temporary check the recent decline in EUR. However, the ease of which these levels are taken out coupled with daily MACD crossing back into negative territory suggest that the outlook for EUR has shifted to bearish. The immediate target is at 1.0710, below this level, the next significant support is closer to 1.0640 followed by the 2015 low of 1.0535/40. In order to maintain the current momentum, any rebound should not move back above 1.0920.
GBP/USD: Shift from neutral to bullish: Over-extended but room for extension to 1.2770.
As highlighted last Friday, a daily closing above 1.2550 would shift the neutral outlook for GBP to bullish. The upmove has been rather rapid and appears to be overextended especially from a shorter-term perspective. That said, as long 1.2400 is not taken out, there appears to be room for further extension to 1.2770.
AUD/USD: Shift from neutral to bearish: Target 0.7440/45.*
As highlighted last Friday, a daily close below 0.7550 would shift the outlook for AUD to bearish. The condition is met and from here, we are targeting a move the 0.7440/45 low seen in September
NZD/USD: Shift from neutral to bearish: Oversold but room for extension to 0.7035.
NZD closed much lower than 0.7180 level and this has clearly shift the outlook to bearish. That said, from a shorterterm perspective, the current decline is rather oversold but there appears to be room for further weakness to 0.7035 (October’s low).
USD/JPY: Bullish: Above 107.45/50 targets 108.30.
USD/JPY just moved above 107.00 at the time of writing. A clear break above 107.45/50 would shift the focus to 108.30.
EUR/USD: Bearish: Next target at 1.0640.
We just turned bearish EUR yesterday and the immediate target indicated at 1.0710 was quickly met with a low of 1.0706. The decline appears to be too rapid and this could lead to a couple of days of correction/consolidation first. However, as long as 1.0870 is not taken out, another leg lower towards the next major support at 1.0640 (weekly trend-line connecting the lows of 1.0455 and 1.0538) would not be surprising.
GBP/USD: Bullish: Over-extended but room for extension to 1.2770.*
Despite the rather sharp pull-back from the recent high of 1.2673, there appears to be room for extension to the next resistance at 1.2770. That said, 1.2673 is acting as a strong short-term resistance and GBP has to reclaim this level within these few days or a break below 1.2400 would indicate that a short-term top is in place.
AUD/USD: Bearish: Target 0.7440/45.*
We turned bearish AUD yesterday with a target of 0.7440/45. There is no change to the view even though oversold short-term conditions could lead to a few day of consolidation (before further attempts lower can be expected).
NZD/USD: Bearish: Oversold but room for extension to 0.7035.
As highlighted yesterday, while the outlook for NZD has shifted to bearish, the recent decline is clearly oversold. That said, further extension to 0.7035 is not ruled out and only a move back above 0.7230 would indicate that a short-term low is in place.
USD/JPY: Bullish: To take partial profit at 109.00.
Since we turned bullish USD late last week, the pace of the run-up has exceeded our expectations. From here, further up-move still seems likely but in view of the severely overbought conditions, those who are long should look to book partial profit near the next resistance at 109.00. Overall, the outlook for USD is deemed as bullish until 106.30 is taken out.
*UOB booked profit on short EUR/USD, and is long GBP/USD and short AUD/USD.
EUR/USD: Bearish: Next target at 1.0640.
There is no change to the bearish view for EUR as we continue to anticipate a move lower towards the next major level at 1.0640.
GBP/USD: Shift from bullish to neutral: In a broad 1.2300/1.2600 range.
The break below 1.2400 yesterday indicates that our recent expectation for GBP to extend its gains to 1.2770 is wrong. The outlook for this pair is viewed as neutral now and we expect to see a period of sideway trading, likely within a broad 1.2300/1.2600 range.
AUD/USD: Bearish: Target 0.7440/45.
There is no change to the current bearish AUD view with a target of 0.7440/45. As highlighted yesterday, oversold short-term conditions could lead to a couple of days of consolidation first. Only a move back above 0.7630 (adjusted from 0.7660) would indicate that a temporary low is in place
NZD/USD: Bearish: Oversold but room for extension to 0.7035. [No change in view]
As highlighted yesterday, while the outlook for NZD has shifted to bearish, the recent decline is clearly oversold. That said, further extension to 0.7035 is not ruled out and only a move back above 0.7230 would indicate that a short-term low is in place.
USD/JPY: Bullish: Next resistance at 110.00.
The partial profit-taking level of 109.00 indicated yesterday was exceeded as USD continues to surge at a solid pace despite severely overbought conditions. There is no sign of an imminent top and the next level to aim for is at 110.00. Above this level, the next significant resistance is at 111.40/45, high seen in late May.
EUR/USD: Bearish: To take partial profit at 1.0640/45.
In line with anticipation, EUR continues to move lower and touched 1.0663 yesterday. This level is just above the revised target indicated previously at 1.0640. While the bearish phase that started on Monday is still intact, shorterterm indicators are over-extended and those who are short should look to take partial-profit at 1.0640/45 (next support at 1.0600).
GBP/USD: Neutral: In a broad 1.2300/1.2600 range.
We just turned neutral on GBP yesterday and there is no change to the view. This is pair is expected to trade sideways for now, likely within a 1.2300/1.2600 range.
AUD/USD: Bearish: Target 0.7440/45.*
The sharp drop in AUD yesterday indicates that the ‘couple of days of consolidation’ highlighted in recent updates has ended. The target remains unchanged at 0.7440/45 but extension towards 0.7405 would not be surprising.
NZD/USD: Bearish: To take partial profit at 0.7035.
NZD touched a low of 0.7036 yesterday, just one pip above our extension target of 0.7035. Downward momentum is showing sign of waning and the odds for a sustained move below 0.7035 have diminished. Those who are short should look to take partial-profit at 0.7035
USD/JPY: Bullish: Diminished odds for further USD strength.
USD touched a high of 109.75 yesterday but pulled back rapidly to close lower for the day. The odds for further USD strength have clearly diminished unless there is sharp rise above 109.75/00 within these 1 to 2 days. We have advocated taking partial-profit at 109.00 previously and from here.
EUR/USD: Bearish: Still clearly bearish, next significant support at 1.0538, 1.0456.
The bearish phase that started on Monday is still clearly intact. In fact, the ease of which the strong weekly trend-line support at 1.0640 is taken out suggests that EUR has more room to go on the downside. There are two significant levels from here, both are major lows seen in 2015. The first is at 1.0538, the low in December followed by the 1.0456 low seen in March. Based on the current momentum, a move to these levels would not be surprising.
GBP/USD: Neutral: In a broad 1.2300/1.2600 range.
While there is no change to the current neutral outlook for GBP, the shorter term undertone has turned negative and the immediate pressure is on the downside. That said, any decline is expected to encounter solid support at 1.2300. Overall, this pair is expected to stay under pressure unless it can move back above 1.2500 within the next 1 to 2 days.
AUD/USD: Bearish: Immediate target exceeded, aim for 0.7305 next.
While we noted yesterday that an extended move to 0.7405 would be surprising, the ease of which this level was taken out was unexpected (though not unwelcome). The bearish AUD phase that started on Monday is intact and the next level to aim for is at 0.7305 (with minor support at 0.7360). S
NZD/USD: Bearish: 0.6955 as next target.
The partial profit taking level of 0.7035 was met in overnight trading. While shorter-term downward momentum is still patchy, there is no sign that the current bearish phase is about to end soon. From here, the next level to aim for is at 0.6955, the low in July.
USD/JPY: Bullish: 111.45 next target.
We highlighted yesterday that the odds for further USD strength would diminish unless there is a sharp rise above 109.75/00 within a couple of days. This scenario unfolded overnight and now that we are clearly above 110.00, the most obvious level to aim for is at the 111.40/45 peak seen in late May.
EUR/USD: Bearish: Still clearly bearish, next significant supports at 1.0538, 1.0456.
There is not much to add to the update last Friday. The next supports are at 1.0538 and 1.0456. Overall, only a move above 1.0720 would indicate that the current bearish phase has ended.
GBP/USD: Neutral: Bearish if daily closing below 1.2300.
As highlighted last Friday, while the shorter term undertone has turned negative, any decline in GBP is expected to encounter solid support at 1.2300. GBP touched a low of 1.2302 during NY session but has recovered somewhat. That said, the undertone is still weak and a daily closing below 1.2300 would indicate that the current neutral outlook has shifted to bearish (with an immediate target of 1.2200). Overall, this pair is expected to stay under pressure unless it can move back above 1.2430/35 within the next 1 to 2 days.
AUD/USD: Bearish: Aim for 0.7305 next.
AUD continues to accelerate lower but is still holding above the 0.7305 support (low of 0.7315 during Sydney hours). A break 0.7305 appears imminent and would shift the focus towards 0.7240.
NZD/UD: Bearish: Aim for 0.6950 as next target.
There is no change to the bearish NZD view and we continue to expect a move to 0.6950/55, the low seen in July. Only a move back above 0.710 would indicate that a temporary low is in place.
USD/JPY: Bullish: 111.45 next target.
USD continues to advance and based on the current momentum, further gains towards the 111.40/45 high seen in late May would not be surprising. The next resistance above this level is at 111.90.
EUR/USD: Bearish: Diminished odds for further EUR weakness.
The lack of follow through despite the overall bearish indications coupled with the rather strong rebound yesterday suggests that the odds for further EUR weakness have diminished. A prolonged consolidation above 1.0540 would lead to a rapid loss in downward momentum and increase the risk of a short-term low.
GBP/USD: Neutral: Back in a 1.2300/1.2600 range.
While we noted that 1.2300 is a solid support and held the view that only a daily closing below this level would shift the current neutral outlook for GBP to bearish, the strong rebound of 200 pips from the low of 1.2313 yesterday was unexpected. Despite the improved undertone, it is too early to view the current GBP strength as part of a sustained upmove. It is more likely that GBP has moved back into the 1.2300/1.2600 sideway consolidation range as expected previously.
AUD/USD: Bearish: To take partial profit at 0.7330.
The strong 0.7305 support continues to hold as AUD rebounded strongly from a low of 0.7311 yesterday. The price action is not congruent with our current view wherein we expect AUD to continue to accelerate lower. From here, those who are short from last week should look to book partial profit on any dip to 0.7320
NZD/UD: Bearish: Increasing risk of a short-term low.
NZD registered a bullish reversal bar yesterday and this clearly indicates that the risk of a short-term low has increased. A move above 0.7100 would indicate that the bearish phase that started early last week has ended. This appears to be a likely scenario unless NZD can move below the very strong 0.6980/85 support within these 1 to 2 days. Note that we have advocated taking partial profit at 0.7035 previously.
USD/JPY: Bullish: 111.45 next target.
USD touched a high of 111.36, just below the revised target of 111.45. The current rally is severely overbought now but confirmation of a short-term is only upon a breach of 109.20. Until then, another attempt towards 111.40/45 cannot be ruled out just yet.
EUR/USD: Bearish: Diminished odds for further EUR weakness.
The bearish phase that started last week is struggling to maintain its momentum. The major support at 1.0538 (low in 2015) is still intact as EUR consolidates after touching a low of 1.0567 last Friday. Indicators are clearly oversold and further consolidation above 1.0535/40 would lead to a rapid loss in downward momentum and diminish the odds for further EUR weakness. However, as long as 1.0700 is intact, the outlook for this pair is still deemed as bearish but we really need to see a break lower soon or the risk of a short-term low would increase quickly.
GBP/USD: Neutral: Back in a 1.2300/1.2600 range.
As highlighted yesterday, despite the strong rebound from the Monday’s low of 1.2313, it is too early to expect to a sustained up-move. The strong pull-back yesterday reinforces our current neutral view and we continue to expect GBP to trade choppily, likely within a broad 1.2300/1.2600 range.
AUD/USD: Bearish: Increasing risk of a short-term low.
The bearish phase that started last Monday appears to be close to ending. The rebound from the low of 0.7311 has been more resilient than expected and from here, a move above 0.7430 would indicate that AUD has entered a neutral consolidation phase (likely within a broad 0.7320/0.7510 range).
NZD/USD: Bearish: Increasing risk of a short-term low. [No change in view]
NZD registered a bullish reversal bar yesterday and this clearly indicates that the risk of a short-term low has increased. A move above 0.7100 would indicate that the bearish phase that started early last week has ended. This appears to be a likely scenario unless NZD can move below the very strong 0.6980/85 support within these 1 to 2 days. Note that we have advocated taking partial profit at 0.7035 previously.
USD/JPY: Bullish: 111.45 next target.
While the bullish outlook for USD is still intact, the recent strong rally appears to be struggling to move above the strong 111.45 resistance. In order to maintain its bullish momentum, USD has to break clearly above this level within these 1 to 2 days. A prolonged consolidation below this level would lead to a rapid loss in momentum which would increase the odds for a short-term top.