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FX Strategists at UOB Group noted the downside in EUR/USD could extend to the 1.2120 area in the next weeks.

Key Quotes

24-hour view: “We highlighted last Friday that ‘there is scope for EUR to test 1.2225 first before the current weakness should stabilize’. However, EUR dropped to 1.2190 before extending its decline this morning. Downward momentum is beginning to improve and EUR is likely to weaken to 1.2150. The next support at 1.2125 is likely out of reach. Resistance is at 1.2225 followed by 1.2250.”

Next 1-3 weeks: “We indicated last Friday that ‘the positive phase has ended’ and expected EUR to ‘trade between 1.2195 and 1.2350 for a period of time’. The rapid manner by which EUR moved below the bottom of the range came as a surprise. The price actions suggest the current movement is likely part of a deeper pull-back. From here, there is room for EUR to weaken to 1.2125. Extension to 1.2080 is not ruled out but at this stage, the odds for such a move are not high. Overall, EUR is expected to trade under pressure unless it can move above 1.2280 (‘strong resistance’ level).”