In opinion of FX Strategists at UOB Group, the pair remains neutral although a sustained decline appears unlikely in the near term.
Key Quotes
24-hour view: “We highlighted yesterday that the “strong decline appears incomplete but any weakness could be checked by the last week’s low near 1.1505/10″. EUR subsequently dipped to a low of 1.1525 before rebounding quickly. While 1.1525 is likely a short-term bottom, we do not anticipate a sustained recovery at this stage. From here, EUR is more likely to consolidate and trade sideways to slightly higher, expected to be between 1.1530 and 1.1605″.
Next 1-3 weeks: “Our recent expectation for a stronger rebound in EUR was proven wrong as the break of the 1.1605 ‘key support’ yesterday resulted in a sharp drop to a low of 1.1539. From here, market is clearly eyeing the 1.1505/10 support as this level was tested twice in recent weeks but held (low of 1.1506 in late May and 1.1507 last week). The weakened undertone suggests that a break below this level would not be surprising but at this stage, the prospect for a period of sustained weakness in EUR below this strong support does not appear to be high (indicators have yet to fully unwind from oversold levels). All in, we expect EUR to stay under pressure, especially within the next several days and a break of 1.3505/10 could lead to a move to 1.3460. On the upside, the ‘key resistance’ is at 1.1670 even though a break above 1.1620 would indicate that the current fledgling downward pressure has eased”.
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