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FX Strategists at UOB Group stay neutral on spot and expect a probable drop to the mid-1.1400s in the next weeks.

Key Quotes

24-hour view: “We expected EUR to “grind lower” yesterday but were of the view that “the prospect for a break of the major 1.1530 support is not high”. However, the expected strong support at 1.1530 did not materialize as EUR cracked this level and dropped quickly to a low of 1.1504. The subsequent sharp bounce from the low amidst oversold conditions suggests EUR has likely made a short-term bottom. That said, it is too early to expect a significant recovery. EUR is more likely to consolidate its loss and trade sideways at these lower levels, expected to be between 1.1525 and 1.1585″.

Next 1-3 weeks: “While we anticipated EUR to weaken since last Friday (28 Sep, spot at 1.1640), the pace and extent of the subsequent decline exceeded our expectation. We previously expected the weakness to be limited to a ‘test’ of the strong 1.1530 support but EUR easily cracked this level and dropped to a low of 1.1504 during London hours yesterday (02 Oct). Despite the subsequent quick recovery from the low, the underlying tone remains soft and from here, we see chance for EUR to weaken further towards the next support at 1.1450. That said, this level is unlikely to come into the picture so soon. On the upside, the ‘key resistance’ has moved lower to 1.1630 from 1.1660 previously”.