EUR/USD: Neutral: Expect further upward grind towards 1.0765, possibly 1.0820.
As noted yesterday, the undertone for EUR has improved considerably and EUR is expected to grind higher towards 1.0765, possibly 1.0820. The high has been 1.0774 during Sydney hours and while further upward extension is not ruled out, 1.0820 is a rather strong resistance and is unlikely to yield so easily. Overall, the current positive undertone would remain intact as long as the major support at 1.0670 is not taken out (1.0700/05 is already a strong shorter-term support). Looking further ahead, a break above 1.0820 would shift the focus towards last month’s high near 1.0870.
GBP/USD: Shift from neutral to bullish: Immediate target of 1.2650.*
We have been positive GBP since the middle of last week (post UK PM May’s speech) and were of the view that the strong rebound at that time has room to extend higher to 1.2480. However, the ease of which this strong declining trend-line resistance was taken out yesterday came as a surprise. Upward momentum has improved significantly and from here, GBP appears to have entered a bullish phase with an immediate target of 1.2650. That said, shorter-term indicators are looking overbought and those looking to turn long may likely to wait for a dip closer to 1.2460/70. Support is at 1.2430 but only a move below 1.2355 would indicate that our bullish expectation is wrong.
AUD/USD: Bullish: Focus is at 0.7630 now.
While AUD appears to be struggling to move clearly above 0.7600, the bullish phase that started two weeks ago is still intact. Only a move below 0.7520 would indicate that an interim top is in place. A clear break above 0.7630 could lead to acceleration higher towards 0.7700.
NZD/USD: Bullish: Room for extension to 0.7300.
NZD burst above the strong 0.7250 resistance (high of 0.7265 at the time of writing) and the 2-week bullish phase appears to have room to extend further to 0.7300. Overall, the outlook for NZD is deemed as bullish until 0.7150 is taken out.
USD/JPY: Neutral: Bearish if daily closing below 112.50.
While we highlighted yesterday that a break below 113.50 would open up the way for a move to 112.55/60, the rapid pace of the decline was unexpected. The immediate risk is still clearly on the downside but we prefer to wait for a daily closing below 112.50 before turning bearish. This appears to be a likely scenario unless USD can move and stay above 113.55 within these 1 to 2 days.
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