EUR/USD: Shift to bearish if NY closing is below 1.1660.
We have held the same view that the weakness in EUR has ‘scope to extend further to 1.1660” since last Wednesday (27 Sep). This level appears to be within striking distance and from here, the odds for a sustained move below this level has increased. To put it another way, the current neutral phase would shift to bearish if NY closing is below 1.1660. If this condition is met, we would anticipate a move below the next major support at 1.1615 (for a move to 1.1500). Overall, only a move 1.1780 would indicate that the current weak phase has stabilized (key resistance was previously at 1.1820).
GBP/USD: Shift from neutral to BEARISH: Room for further weakness towards 1.3000.
In the update yesterday (05 Oct), we highlighted the risk of a “deeper down-move in the coming days” and were of the view that the outlook for GBP will shift to bearish if there is a NY closing below 1.3225. While the expectation was not wrong, the pace of the decline was more rapid than anticipated as the overnight low already came close to the immediate target of 1.3100. Despite the rapid drop, there is room for further weakness towards the next support at 1.3000. Only a move back above the 1.3250 high registered yesterday would indicate that our bearish expectation is wrong. Positioning wise, the current level does not offer attractive reward to risk ratio and those who are still keen to sell may like to wait for a bounce to 1.3170/75.
AUD/USD: Improved odds for further weakness but 0.7740 would not be easy to crack.
After coming close to our stop-loss at 0.7880 (high of 0.7875 on Wednesday, 04 Oct), AUD staged a surprisingly strong and sharp decline yesterday (due to very weak Australian retail sales data). The sharp drop has clearly improved the odds for further downside extension but we continue to see solid support at 0.7740 and this level would not be easy to crack (next support is at 0.7700)
NZD/USD: Neutral (since 06 Sep 17, 0.7255): Shift to bearish if daily closing is below 0.7075.
We have held the same view that the pull-back in NZD “room to extend to 0.7135” since last Wednesday (27 Sep). This level was finally exceeded as NZD dropped to a low of 0.7111 yesterday. While the immediate pressure is still clearly on the downside, we prefer to wait for a daily closing below the 0.7075 support before adopting a bearish stance. This scenario seems likely unless NZD can move and stay above 0.7155 within these 1 to 2 days.
USD/JPY: Bullish (since 28 Sep 17, 112.80): Diminished odds for further USD strength, long to exit half of position.
There is not much to add as USD continues to hold below the key 113.25 resistance. As highlighted in recent updates, upward momentum has started to wane and the odds for further USD strength towards 113.80 are not high. That said, only a move back below 112.20 would indicate that a short-term top is in place. Positioning wise, those who are long from 112.40 would have exited half of their position at 112.75.