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UOB Group’s FX Strategists noted EUR/USD could face a deeper pullback of 1.2050 is cleared in the near-term.

Key Quotes

24-hour view: “We highlighted last Friday that ‘downward pressure has eased’ and we expected EUR to ‘trade sideways within a 1.2085/1.2150 range’. EUR subsequently traded between 1.2092 and 1.2155 before closing slightly higher at 1.2136. While further sideway-trading would not be surprising, the weakened underlying tone suggests EUR could retest the 1.2090 level. The major support at 1.2050 is not expected to come into the picture. Resistance is at 1.2145 followed by 1.2160.”

Next 1-3 weeks: “There is not much to add to our update from last Thursday (28 Jan, spot at 1.2105). As highlighted, ‘shorter-term downward momentum is improving and the risk is shifting to the downside’. That said, EUR has to close below 1.2050 before a sustained decline can be expected. The odds for such a move are quite high unless EUR moves above 1.2180. Looking ahead, the next support below 1.2050 is at 1.2000.”