FX Strategists at UOB Group still believe EUR/USD could test the 1.1100 neighbourhood in the near term.
Key Quotes
24-hour view: “We held the view yesterday EUR is “likely to weaken further but year-to-date low near 1.1105 could be safe for now”. We added, there is a “minor support at 1.1125″. EUR subsequently dipped briefly to 1.1125 before trading mostly sideways for the rest of the sessions. While downward pressure is beginning to ease, it is too soon to expect a sustained recovery. EUR is more likely to consolidate at these lower levels and trade between 1.1125 and 1.1165″.
Next 1-3 weeks: “For the past 3 weeks or so, EUR has traded in an ‘undecided’ manner, swinging between 1.1192 and 1.1285, less than a 100 pips range. Our latest narrative was for EUR to continue to “trade sideways” but after registering the smallest 1-day range since Apr 2014 on Monday (22 Jul), EUR staged a sudden and sharp drop as it plunged to a 2-month low of 1.1144 yesterday. Downward momentum has picked up strongly and the focus from here is clearly at 1.1106, the year-to-date (and also 26-month) low registered in late May. After yesterday’s price action, a fresh year-to-date low would not be surprising but what is less clear is whether any weakness below this level is sustainable (next support is at 1.1045). All in, EUR is expected to stay under pressure unless it can move above the 1.1215 ‘key resistance’.
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