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FX Strategists at UOB Group remain neutral on spot while noted that a test of 1.1850 stays well on the cards in the next weeks.

Key Quotes

24-hour view: “While we highlighted yesterday “the consolidation phase appears to be close to completion”, our expectation for a likely downside break was wrong. EUR staged an abrupt and sharp rally that blast past the major 1.1725/35 resistance zone and came close to the next major resistance at 1.1790 (overnight high of 1.1785). The strong surge seems to be running ahead of itself but there is ample room for a move above 1.1790. That said, the June’s peak near 1.1851 is likely out of reach for today (minor resistance at 1.1825). On the downside, 1.1720 is expected to be strong enough to hold any intraday pullback (minor support is at 1.1750)”.

Next 1-3 weeks: “We have held the same view since last Friday wherein the “probability for a move to 1.1790 has increased”. EUR subsequently traded sideways for several days and our resolve was tested as we indicated yesterday that the “prospect for further EUR strength has diminished”. Just when we thought time was running out for our view to work out, EUR rocketed and blast past the strong 1.1725/35 resistance zone and hit a high of 1.1785 (holding just a few pips below 1.1790). The outsized rally (the +0.88% up-move yesterday was the largest 1-day gain in 3 months) coupled with the break of strong resistance levels indicates scope for further EUR strength towards the next resistance at 1.1850 (June’s peak). All in, we expect EUR to trade on a firm footing from here and only a break of 1.1690 (‘key support’ previously at 1.1640) would indicate that the current EUR strength has run its course”.