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EUR/USD risks entering into a consolidative pattern – UOB

FX Strategists at UOB Group see the probability that EUR/USD could move into a sideline theme in the near term.

Key Quotes

24-hour view: “We expected EUR to “drift lower” yesterday but held the view “a break of 1.1050 would come as a surprise”. We also highlighted that “there is another support at 1.1070″. EUR subsequently traded in an insipid manner and within a narrow 27 pips range (between 1.1071 and 1.1098). The soft underlying tone appears to have stabilized somewhat but it is too early to expect a sustained recovery. EUR is more likely to continue to trade sideways even though the immediate bias is for it to probe the top of the expected 1.1070/1.1110 range first”.

Next 1-3 weeks: “EUR closed lower for third straight day albeit not by much (NY close 1.1077, -0.11%). For now, we continue to hold on to the view from Monday (26 Aug, spot at 1.1145) wherein the strong corrective rebound from late last week has room to extend higher. That said, the price action over the past few days have softened the positive underlying tone. From here, EUR has to move and stay 1.1130 within these 1 to 2 days or the current price action looks more akin to be part of ‘broad consolidation phase’ instead of a ‘corrective rebound’. A breach of 1.1050 would also indicate upward pressure has eased that EUR has moved into a consolidation phase”.

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