The US Dollar lost some ground on Powell’s relatively dovish words on Friday at Jackson Hole. How are currency pairs lined up?
Here is their view, courtesy of eFXdata:
EUR/USD: Neutral (since 21 Aug 18, 1.1485): Probability for a break of next resistance at 1.1670 has improved considerably.
We have held the same view since last Tuesday (see an update on 21 Aug, spot at 1.1485) wherein the robust recovery in EUR has a chance to test the major 1.1630 resistance. After a few days of choppy price action, EUR finally reached this resistance as it hit a high of 1.1639 last Friday. As highlighted, the next resistance above 1.1630 is at 1.1670 and while the probability for a clear break of this level is still not high, it has improved considerably. A NY closing above 1.1670 would suggest that EUR is ready to tackle the major resistance at 1.1745/50. On the downside, only a break of the ‘key support’ at 1.1545 (level previously at 1.1470) would indicate that the current upward pressure has eased.
GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Still neutral, GBP has moved into a consolidation phase.
GBP tested the strong 1.2800 support last Friday (exact low of 1.2800) before rebounding. The recovery has improved the underlying tone somewhat but it is too early to expect the start of a bullish phase. In other words, we continue to expect GBP to consolidate and trade sideways from here, albeit likely at a higher range of 1.2760/1.2960 (from 1.2700/1.2900 previously).
AUD/USD: Neutral (since 21 Aug 18, spot at 0.7335): AUD is expected to trade sideways.
AUD reversed almost all of Thursday sharp drop of -1.39% as it surged and closed at 0.7326 in NY last Friday (+1.04%). Such back-to back move of more than 1% of opposite direction is rare and the last time we witnessed such price action was more than 2 years ago in June 2016. While downward pressure has eased with the sharp rebound, AUD does not appear to be ready to extend its advance significantly from here. To put it another way, there is no change to the current neutral outlook and we expect AUD to trade sideways, likely within a 0.7250/0.7420 range.
NZD/USD: Neutral (since 20 Aug 18, 0.6625): NZD has moved into a higher trading range.
NZD rebounded from a low of 0.6620 and hit a high of 0.6696 last Friday. The price action was well within our expected 0.6610/0.6760 consolidation range and at this stage, we are holding on to the same view. That said, the underlying tone has improved somewhat and the immediate bias is for NZD to probe the top end of the expected range.
USD/JPY:  Neutral (since 23 Jul 18, 111.20): Rebound has scope to extend higher but 112.14 is likely out of reach. No change in view.
The strong surge in USD yesterday was clearly unexpected. While the pressure has shifted quickly to the upside, the recent choppy price action suggests that it is unlikely USD has moved into a bullish phase. That said, the current rebound has scope to extend higher but at this stage, the month-to-date high of 112.14 is likely out of reach (112.00 is already a formidable resistance). On the downside, a dip below 110.50 (‘key support’) would indicate that the current short-term upward pressure has eased.
For lots more FX trades from major banks, sign up to eFXplus
By signing up for eFXplus via the link above, you are directly supporting Forex Crunch.
