EUR/USD: Neutral: Strong rebound to extend to 1.0680.
EUR touched a high of 1.0640 but the up-move was quickly reversed. Despite the weak daily closing, the strong rebound from last Friday’s 1.0499 low appears to have scope to extend higher to test 1.0680. At this stage, a clear break of this level is not expected. Support is at 1.0550 but only a move below 1.0520 would indicate that the immediate upward pressure has eased.
GBP/USD: Bearish: Expect further weakness to 1.2200.
Despite the overall bearish indications, the lack of a sustained down-move in GBP is discouraging. However, only a move back above 1.2340 (adjusted from 1.2380) would indicate that the bearish phase that started late last week has ended. In the meanwhile, this pair is expected to continue to drift lower towards 1.2200 even though this is a major support and is unlikely to yield so easily (next support is at 1.2150).
AUD/USD: Neutral: Expect further weakness towards 0.7510.
As indicated yesterday, as long as 0.7645 is intact, the sharp drop from the end of last week appears to have room to extend lower towards 0.7510 (with strong intervening support at 0.7545). At this stage, we view the current AUD weakness as a corrective pull-back and a sustained move below 0.7510 is not expected.
NZD/USD: Neutral: Room for extension to 0.6950 but odds are not high.
While we held the view that the immediate pressure is still on the downside, the pace and depth of the decline in NZD continues to surprise. The recent sharp drop is severely oversold now and while further extension to 0.6950 is not ruled out, the odds for such a move are not high. That said, confirmation that the immediate downward pressure has eased is only upon a move back above 0.7050.
USD/JPY: Neutral: Rebound has room to extend to 114.95. [No change in view]
The ‘rebound target’ indicated at 114.95 is not met as USD fell sharply after touching a high of 114.74 last Friday. While the rapid pull-back has dented the upward momentum, another attempt to move towards 114.95 still seems likely. This is a rather strong resistance and is unlikely to break so easily. On downside, support is at 113.50 but only a move below 113.35 would indicate that a short-term top is in place.
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