EUR/USD: Neutral: Upside risk is greater but in a 1.0725/1.0935 range for now.
We indicated last Friday that “the bias is tilted to the upside but 1.0775/80 is acting as a very strong resistance and only a clear break of this level would indicate a move towards 1.0825 has started”. EUR opened with a gap higher this morning, well above 1.0775/80 before moving to a high of 1.0935. While the undertone is still clearly positive, the question now is whether the current EUR strength can be sustained in the coming days. Based on the over-extended up-move, EUR is more likely to consolidate its gains and trade sideways for several days, likely holding between 1.0725 and 1.0935. Further out, as long as 1.0725 is not taken out, the odds for an upside break is greater.
GBP/USD: Bullish: Overbought but room for extension to 1.2950.
GBP briefly edged above last week’s 1.2908 peak early this morning to touch a high of 1.2910. Despite the rapid pullback from the high, it is too early to expect a short-term top. There is still room for another push higher towards 1.2950 but we have to see such a move within these few days as a prolonged consolidation at these overbought levels would lead to a rapid loss in momentum.
AUD/USD: Neutral: In a 0.7475/0.7615 range.
In recent updates, we warned of increasing risk of a break below the month-to-date low of 0.7475. The positive daily closing last Friday coupled with the quick rise to a high of 0.7600 early this morning indicates that the prospect for such a move have fizzled out. In other words, downward pressure has eased and AUD has likely moved into a consolidation phase, likely between 0.7475 and 0.7615.
NZD/USD: Neutral: In a 0.6940/0.7060 range.
NZD moved towards the top of the expected 0.6940/0.7060 consolidation range this morning with a high of 0.7054. Upward momentum has improved but only a clear break above 0.7060 would indicate that a move towards 0.7130 has started. At this stage the odds for such a move are not high and it is more likely that NZD is still trapped within a range.
USD/JPY: Neutral: In a higher range of 109.30/110.60.
While we indicated last Friday that a short-term low is likely in place at 108.11, the strong surge upon opening this morning was unexpected. The rally took out several resistances with a high of 110.61. The undertone has improved considerably and the immediate risk is tilted to the upside but at this stage, we are not convinced that USD has moved into a bullish phase. This pair has more likely entered into a higher 109.30/110.60 range and only a daily closing above 110.60 would indicate that a move towards 111.55/60 has started.