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FX Strategists noted there is still the chance for EUR/USD to slip back below the 1.2000 level in the near-term.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the sharp and swift rebound could extend but any advance is likely limited to a test of 1.2110’. While our view was not wrong as EUR rose to 1.2112, we did not anticipate the subsequent sharp drop. While downward momentum has not improved by much, the bias for EUR is tilted to the downside towards 1.2020. The major support at 1.1985 is unlikely to come into the picture (there is another minor support at 1.2000). Resistance is at 1.2085 followed by 1.2110.”

Next 1-3 weeks: “On Monday (01 Mar, spot at 1.2085), we highlighted that ‘downside risk has increased and EUR could drop to 1.2020’. EUR subsequently dropped to 1.2026 and we noted yesterday (02 Mar) that ‘risk is still on the downside and the next support below 1.2020 is at 1.1985’. EUR came close to 1.1985 as it dropped to 1.1990 during London hours yesterday before staging a sharp rebound. Downward momentum has waned but as long as 1.2135 (no change in ‘strong resistance’ level) is intact, there is still chance, albeit a slim one for EUR to make another run lower. That said, in order to rejuvenate the flagging momentum, EUR has to move and stay below 1.2030 within these 1 to 2 days or a break of 1.2135 would not be surprising.”