FX Strategists at UOB Group did not rule out a visit to yearly lows and possibly below in the near term.
Key Quotes
24-hour view: “Instead of “drifting lower to 1.1195″, EUR plunged and cracked a few strong support levels with ease. The sharp and rapid drop coupled with the weak daily closing in NY (1.1150) suggests a move below the overnight low of 1.1144 would not be surprising. That said, the decline is approaching oversold territory and the year-to-date low near 1.1105 could be ‘safe’, at least for today. (minor support at 1.1125) On the upside, only a move above 1.1190 would indicate that the current weakness has stabilized (minor resistance is at 1.1175)”.
Next 1-3 weeks: “For the past 3 weeks or so, EUR has traded in an ‘undecided’ manner, swinging between 1.1192 and 1.1285, less than a 100 pips range. Our latest narrative was for EUR to continue to “trade sideways” but after registering the smallest 1-day range since Apr 2014 on Monday (22 Jul), EUR staged a sudden and sharp drop as it plunged to a 2-month low of 1.1144 yesterday. Downward momentum has picked up strongly and the focus from here is clearly at 1.1106, the year-to-date (and also 26-month) low registered in late May. After yesterday’s price action, a fresh year-to-date low would not be surprising but what is less clear is whether any weakness below this level is sustainable (next support is at 1.1045). All in, EUR is expected to stay under pressure unless it can move above the 1.1215 ‘key resistance’.
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