Current short term Forecast - page 14
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EUR/USD: Neutral: Downward pressure but expects strong support at 1.0505.
As highlighted in the update last Friday, the near-term pressure is tilted to the downside but any decline is expected to encounter solid support at the ‘Italian referendum’ low of 1.0505. This level is followed closely by another major support which is the 2015 low of 1.0455/60. Overall, EUR is expected to stay under pressure in the coming days unless it can move and stay above 1.0670 (1.0630 is already a strong short-term resistance).
GBP/USD: Neutral: In a 1.2480/1.2750 range.
There is not much to add as GBP traded in a muted manner last Friday within a narrow range of 1.2554/1.2620. We continue to hold a neutral view for now and expect this pair to trade in a broad 1.2480/1.2750 range in the next one week or so.
AUD/USD: Neutral: In a higher range of 0.7350/0.7550.
AUD continues to trade mostly sideways and the neutral phase that started late last month is still intact. In other words, expect further range trading between 0.7350 and 0.7550 for now.
NZD/USD: Neutral: In 0.7070/0.7200 range.
The recent attempt to move clearly above 0.7200 has failed as NZD dropped below the strong 0.7140 short-term support last Friday. The neutral phase that started late last month is still intact and this pair has likely lapsed back into a range trading mode, likely within a 0.7070/0.7200 range.
USD/JPY: Neutral: Overbought but room for extension to 116.50.
The ease of which the major 115.00 resistance was taken out last Friday was unexpected. While indicators are mostly overbought after the sharp rise, the current USD strength appears to have scope to extend further to 116.50 (low in August 2015) even though at this stage, a sustained move above this level seems unlikely. That said, the current positive undertone is intact unless there is a move back below 114.30.
EUR/USD: Neutral: Downward pressure but expects strong support at 1.0505.
As highlighted yesterday, we were of the view that as long as the strong 1.0670 resistance is intact, another attempt to move lower towards the major 1.0505 support could not be ruled out (even though the odds for such a move are not high). EUR touched a high of 1.0666 yesterday (holding just below the 1.0670 resistance) before easing off quickly. From here, we are faced with the same view but unless there is a sustained move below 1.0595 within these 1 to 2 days, the odds for further weakness would diminish quickly
GBP/USD: Neutral: In a 1.2480/1.2750 range.
GBP hit a high of 1.2728 yesterday (holding below the strong 1.2750 resistance) but eased off quickly. Shorter-term upward momentum has waned considerably and at this stage, we continue to hold a neutral view and expect further sideways consolidation between 1.2480 and 1.2750.
AUD/USD: Neutral: In a higher range of 0.7350/0.7550.
AUD/USD: AUD closed largely unchanged and as noted yesterday, the generally positive momentum would improve further if this pair could continue to hold at these higher levels. That said, it is unclear at this stage whether we can see a sustained move above 0.7550. Overall, only a move below 0.7445 would indicate that the current positive bias has eased.
NZD/USD: Neutral: Positive outlook but sustained up-move only if clearly above 0.7250.
The rebound from the late November low of 0.6970 is more resilient than expected as NZD edged above the strong 0.7200 resistance. While further advance would not be surprising, there is another major resistance at 0.7250 and only a clear break above this level would indicate that a move towards 0.7350 has started. Overall, the current upward pressure would continue to increase unless there is a move back below 0.7140 within these 1 to 2 days.
USD/JPY: Neutral: Signs of waning momentum but too early to expect a bearish reversal.
There is not much to add; as noted yesterday, the recent strong upward momentum has waned but at this stage, it is too early to expect a bearish reversal. USD is more likely to trade sideways for now, likely between 114.00 and 116.00.
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EUR/USD: Shift from neutral to bearish: target a move to monthly trendline support at 1.0190.
As noted yesterday, a breach of the major 1.0455/60 support (2015 low) would indicate that EUR has entered a bearish phase. The decline yesterday is accompanied by strong downward momentum as we witnessed a rapid drop to an overnight low of 1.0364. Overall, the outlook for EUR appears to be bleak in the coming weeks as the next significant support is much further down at 1.0190 (rising trend-line on the monthly chart). Any short-term rebound is expected to stay below 1.0570.
GBP/USD: Shift from neutral to bearish: Target 1.2300/05.
As highlighted yesterday, a breach of 1.2480 would shift the outlook for GBP to bearish. The immediate target is at 1.2300 followed 1.2250.
AUD/USD: Neutral: Bearish if clearly below 0.7310.
While the strong support at 0.7350 was breached, the downward momentum is not as strong as preferred and we are still reluctant to adopt a bearish stance for now. Last month’s low near 0.7310 is acting as a major support and only a clear break below this level would shift the outlook to bearish (with an immediate 0.7205). Overall, AUD is expected to stay under pressure in the near term unless it can reclaim 0.7450 within these few days.
NZD/USD: Neutral: Bearish if clearly below 0.6970.
Similar to AUD/USD, we prefer to wait for a clear break below last month’s 0.6970 low before adopting a bearish NZD stance. However, this pair is expected to stay under pressure unless it can move and stay above 0.7110.
USD/JPY: Bullish: Focus on 119.00, 120.00 next.
We just shifted to a bullish USD stance yesterday and there is no change to the view. Despite overbought conditions, USD continues to march higher and the immediate target at 118.30 was easily exceeded. From here, the focus is at 119.00 and 120.00.
EUR/USD is piercing below lower bound of broad consolidation in force since 2015 (1.0465). A weekly close below 1.0465 remains needed to deepen the correction.
In such a case, the pair will head to next significant support at 1.0180/1.00, 76.4% retracement of 2000-2008 up trend. 1.03/1.0260 is interim support
USD/JPY tested pivotal graphical level of 100 and also probed the multiyear trend support in June this year. Since then it has been undergoing a steady up move and it has also met the projected target for a double bottom formation confirmed The pair is now closing in on a multi month descending trend near 119.50, also the 76.4% retracement of the whole down move from June 2015 highs. Daily RSI is hovering close to a ceiling which denotes possibility of a consolidation once aforementioned levels are achieved.
116.70/50 will be an immediate support while the 20 day MA at 114.70 will be important. In the event of persistent bullish momentum, next key hurdle will be at the multi decade descending trend near 123/125.
NZD/USD tentatively pierced our advocated resistance of 0.7190/0.7250 which happens to be a multi month ascending trend but it has quickly reversed and is now heading towards October 2015 highs, also the 50% retracement of up move from September last year. It is noteworthy that the pair has confirmed a H&S pattern which denotes a bearish reversal.
With daily MACD in negative territory, the support at 0.69/0.6860 may prove to be temporary. A break below will mean a deeper correction initially towards May lows of 0.6670 and even towards potential of the pattern at 0.6540.
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EUR/USD Weekly Forecast January 2-6
Low volatility dominated the currency markets in the first half of the week but a surge in EUR/USD on the last trading day of the year was the highlight of the past week. The pair failed to sustain gains for the day and while the daily print suggests near-term bearish potential, technical developments over the past few weeks indicate the potential for a broader recovery.
EUR/USD surged 165 points from its open on Friday but only managed to hold on to a gain of 29 points to end the day. The shooting star daily print may keep the pair under pressure in the upcoming week. The larger time frames, however, show a recovery in progress. On a weekly chart, the pair has printed a morning star reversal formation and more importantly has shown a failure to sustain below the 2015 low of 1.0462. The monthly chart has printed a doji for December, signaling an exhaustion of the downtrend, further building a case for a broader recovery.
In the upcoming week, there is a bank holiday in the United States on Monday but the European markets will be open and PMI data will be released through the early European session. Volatility is expected to pick up from Tuesday onwards. There are several economic releases pertaining to EUR/USD, the highlights include US manufacturing PMI figures on Tuesday, Euro CPI data as well as the meeting minutes from the last Fed meeting on Wednesday, US non-manufacturing PMI numbers on Thursday and the NFP jobs report on Friday.
The FOMC minutes will be important as they will provide detail on how the Fed came to the decision to raise their forecast for the path of normalization in 2017. The minutes may reveal how much of an impact the election had in the central bank’s more hawkish stance as prior communication indicated the decision was based mostly on economic developments. There is an expectation that Trump policy will lead to a rapid rise in inflation and it will be important how much consideration the central bank has put on the impact of the new administration actions.
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EUR/USD: Neutral: In a 1.0370/1.0600 range.
The unexpected surge to a high of 1.0651 last Friday coupled with the equally rapid reversal has resulted in a mixed outlook. We hold a neutral stance now and expect broad choppy sideways trading within a broad 1.0370/1.0600 in the coming days.
GBP/USD: Bearish: Diminished odds for further GBP weakness.
The bearish phase that started about 2 weeks ago is still intact as long as 1.2400 is not taken out. However, downward momentum has waned with the sharp rebound last Friday and the odds for extension towards the next key level at 1.2150 are not high.
AUD/USD: Neutral: In a 0.7120/0.7300 range.
The recent decline in AUD appears to have found a shortterm low last week. While the immediate bias is on the upside, the current movement is viewed as part of a broad 0.7120/0.7300 consolidation range and not the start of a bullish reversal.
NZD/USD: Neutral: In a 0.6860/0.7020 range.
The current outlook for NZD is viewed as neutral and we expect this pair to trade in a broad 0.6860/0.7020 range for now.
USD/JPY: Neutral: In a 115.50/118.50.
USD has been trading in a relatively narrow range for the past few weeks. At this stage, we continue to hold a neutral stance and expect USD to trade in a broad 115.50/118.50 range.
EUR/USD: Neutral: Bearish if clearly below 1.0335/40.
Downward momentum has improved considerably with the unexpected sharp drop yesterday. The immediate pressure is clearly on the downside but only a clear break below 1.0335/40 would indicate that a move towards 1.0200 has started. Overall, EUR is expected stay under pressure unless it can reclaim 1.0490 within these 1 to 2 days.
GBP/USD: Bearish: Diminished odds for further GBP weakness.
The outlook for GBP is still bearish but 1.2200 is a major support and this level has to crack before a move towards the next target at 1.2150 can be expected. On the upside, only a move back above 1.2340 would indicate that a temporary low is in place. The next support below 1.2150 is near the October’s low of 1.2080/85.
AUD/USD: Neutral: In a 0.7120/0.7300 range. [No change in view]
The recent decline in AUD appears to have found a shortterm low last week. While the immediate bias is on the upside, the current movement is viewed as part of a broad 0.7120/0.7300 consolidation range and not the start of a bullish reversal.
NZD/USD: Neutral: In a 0.6860/0.7020 range.
The current outlook for NZD is viewed as neutral and we expect this pair to trade in a broad 0.6860/0.7020 range for now.
USD/JPY: Neutral: In a 115.50/118.50.
While USD edged above the top end of our expected sideway consolidation range of 118.50 yesterday (high of 118.60), we continue to view the current strength as part of a broader consolidation and not the start of a sustained upmove. That said, a test of 119.00 would not be surprising but at this stage, only a sustained break above this level is not expected.
EUR/USD: Neutral: Back in a range, likely between 1.0420 and 1.0620.
We highlighted yesterday that the condition for the current neutral outlook to shift to bearish is only upon a clear break below 1.0335/40. The sharp rebound yesterday indicates that the immediate downward pressure has eased and EUR has likely moved back into a consolidation phase and is expected to trade between 1.0420 and 1.0620 for now.
GBP/USD: Shift from bearish to neutral: In a 1.2220/1.2450 range.
The bearish phase that started in mid-December has ended with the move above 1.2340 yesterday (high of 1.2354). The current movement is likely the early stages of a consolidation phase and GBP is expected to trade in a broad 1.2220/1.2450 range for now.
AUD/USD: Neutral: Bullish only if above 0.7350.
Despite the strong up-move yesterday, we are not convinced that the current AUD strength can be sustained. That said, the immediate pressure is on the upside (as long as 0.7215 is intact) but only a clear break above 0.7350 would indicate the start of a bullish phase.
NZD/USD: Neutral: In a 0.6860/0.7020 range.
While upward momentum has improved with the strong daily closing yesterday, we continue to hold a neutral stance for now and would shift to bullish only if there is a clear break above 0.7020.
USD/JPY: Neutral: In a 115.50/118.50.
As noted yesterday, despite the breach of 118.50 on Tuesday, we view the USD strength as part of a broader consolidation and not the start of a sustained up-move. The sharp decline yesterday reinforces our view and we continue to expect USD to trade choppily within a broad 115.50/118.50 range for now.
EUR/USD: Neutral: In a range, likely between 1.0420 and 1.0620.
EUR touched a high of 1.0615 yesterday, just a few pips below our expected sideways consolidation range of 1.0420/1.0620. While the swift and sharp rally has resulted in a positive undertone, we prefer to wait for a clear break above the major 1.0650/70 zone before shifting to a bullish stance. For the next couple of days, only a move below 1.0520 would indicate that the immediate upward pressure has eased.
GBP/USD: Neutral: In a 1.2220/1.2450 range.
We turned neutral yesterday and were of the view that GBP has moved into a 1.2220/1.2450 consolidation range. While the overnight high of 1.2432 did not threaten the 1.2450 resistance, the rapid rise yesterday has resulted in a positive undertone (especially on a short-term basis). From here, a move above 1.2450 is not ruled out but 1.2500 and 1.2550 are both very strong resistances and these levels are unlikely to yield so easily. All said, the current positive undertone would ease only upon a move back below 1.2270 (minor support at 1.2330).
AUD/USD: Neutral: Bullish only if above 0.7350.
AUD edged above the strong 0.7350 resistance yesterday (high of 0.7356) but has eased off somewhat. As highlighted, we prefer to see a clear break above 0.7350 (say a daily closing above this level) before turning bullish. For the next couple of days, the upward pressure would likely continue to build as long as any short-term pull-back were to hold above 0.7250. A shift above to a bullish stance would have an immediate target of 0.7430.
NZD/USD: Neutral: Bullish if daily close above 0.7055.
While NZD moved above the strong 0.7020 resistance, the short-term price action is extremely overbought and only a daily closing above 0.7055 would indicate the start of a sustained up-move. Such a scenario would not be surprising as long as the support at 0.6955 is intact.
USD/JPY: Neutral: Pull-back has room to extend lower to 114.00.
USD broke below the expected 115.50/118.50 range (low of 115.08) earlier but we are not convinced that the current weakness can be sustained. The price action is more akin to a deep corrective pull-back instead of the start of a major bearish reversal. That said, the short-term pressure is on the downside and there is scope for further weakness to 114.00 (though we do not attach a high probability for such a move). Only a move back above 116.80 would indicate that the current weakness has stabilized (minor resistance at 116.20).
EUR/USD: Neutral: In a range, likely between 1.0420 and 1.0620.
EUR tried but failed to move clearly above the 1.0620 resistance last Friday (high of 1.0621). The subsequent rapid drop from the high suggests that EUR is not ready to break out of its current 1.0420/1.0620 consolidation range. That said, the near-term bias is tilted to the upside but 1.0620 is expected to continue to offer solid resistance in the coming days (followed closely by the major resistance zone near 1.0650/70).
GBP/USD: Neutral: In a 1.2220/1.2450 range.
The top end of our expected sideway consolidation range of 1.2220/1.2450 remains intact as GBP dropped sharply after hitting a high of 1.2430 last Friday (Thursday’s peak was slightly higher at 1.2432). The quick and rapid drop reinforces our current neutral stance and in the coming days, we continue to expect GBP to trade within the range mentioned above.
AUD/USD: Neutral: Bullish only if above 0.7350.
AUD hit a low of 0.7160 late last month but has since rebounded strongly. The recovery is more than resilient than expected and is currently approaching the major 0.7350/55 resistance (falling trend-line connecting the highs of 0.7778 and 0.7525). A clear break above 0.7350/55 would indicate the start of a sustained up-move with an immediate target of 0.7430 followed by the early December high of 0.7525 (minor resistance at 0.7395). Overall, the current constructive price action is expected to stay intact unless there is a drop back below the strong short-term support at 0.7250
NZD/USD: Neutral: In a 0.6920/0.7055 range.
NZD dropped sharply last Friday without challenging the major 0.7055 resistance (high of 0.7044). The recent upward pressure has eased but while there is no change to the current neutral outlook, NZD is more likely to trade in a broad 0.6920/0.7055 range instead of trying to push above 0.7055.
USD/JPY: Neutral: Back in a 115.50/118.60 range.
We indicated last Friday that we do not attach a high probability for further extension lower in USD towards 114.00. That said, the abrupt and sharp rebound from 115.04 was unexpected. The recent downward pressure has eased and USD has likely moved back into a broad consolidation range, likely between 115.50 and 118.50.