In view of FX Strategists at UOB Group, the pair still looks vulnerable and could test the 1.1297 level in the near term. However, a sustained break below this area appears unlikely.
Key Quotes
24-hour view: “While we expected EUR to weaken further yesterday, we warned that “any weakness could be limited to 1.1350″. EUR subsequently dropped to a low of 1.1353 before rebounding slightly. Despite the decline, downward momentum is showing sign of tiring and we do not expect further sustained weakness from here. That said, a dip below 1.1350 is not ruled out but any weakness is viewed as a lower trading range of 1.1335/1.1410. To put it another way, the next major level at 1.1297 (year-to-date low) is not expected to come into the picture”.
Next 1-3 weeks: “We highlighted yesterday, there is “ample room for EUR to weaken further to 1.1350″. EUR staged a minor bounce after ECB’s announcement but plummeted subsequently and hit a low of 1.1353. While there is no sign the ‘negative’ phase that started late last week (18 Oct, spot at 1.1505) is stabilizing, short-term indicators are at severely oversold levels and it is unlikely EUR can maintain the pace of its current decline (see 24-hour update above). From here, a dip below 1.1350 is not ruled out but at this stage, the prospect for a sustained break below the year-to-date low of 1.1297 is not that high. That said, as long as the ‘key resistance’ at 1.1450 (level previously at 1.1480) is intact, the odds for a fresh low would continue to increase”.
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