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In light of the recent price action in EUR/USD, FX Strategists at UOB Group believe that further pullbacks are likely in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that EUR ‘could revisit 1.0800, possibly testing last month’s low of 1.0775’. While our view for a lower EUR was correct, we did not anticipate the subsequent outsized sell-off as EUR posted the largest 1-day drop (-2.04%) since June 2016. Obviously, downward momentum is strong and this coupled with lack of support levels of note could lead to further sharp and rapid decline in EUR. From here, barring a move above 1.0800 (minor resistance at 1.0750), EUR could weaken further to 1.0550, possibly as low as 1.0480.”

Next 1-3 weeks: “We highlighted yesterday (19 Mar, spot at 1.0935) that ‘a break of last month’s low of 1.0775 would open up the way for further EUR weakness to 1.0700’. The price action after the breach of the critical level of 1.0775 was more severe than expected as EUR plunged to 1.0653 before ending the day lower by a whopping -2.04% (1.0690), the largest 1-day drop since June 2016. The surging downward momentum coupled with breach of critical support level suggests EUR is likely to continue to decline in the coming days. While it is premature for now, we are not ruling out the possibility of EUR dropping to the 2017 low near 1.0340. Meanwhile, EUR is expected to stay under pressure unless it can move above 1.1000 (‘strong resistance’ level was at 1.1100 yesterday). On a shorter-term note, 1.0940 is already a strong level.