The outlook on the pair remains neutral, while a breakdown of 1.1297 appears to have lost some momentum for the time being, according to FX Strategists at UOB Group.
Key Quotes
24-hour view: “We highlighted last Friday “a dip below 1.1350 is not ruled out but any weakness is viewed as a lower trading range of 1.1335/1.1410″. EUR subsequently dipped to 1.1332 but recovered quickly to hit a high of 1.1420 during late NY hours. Downward pressure has clearly eased and the current movement is viewed as part of a corrective recovery phase. The correction has scope to extend higher but the major 1.1450 resistance is likely out of reach (1.1430 is already quite a strong level). Support is at 1.1375 followed by 1.1350. The 1.1332 low is expected to be ‘safe’ for now”.
Next 1-3 weeks: “After holding a ‘negative’ EUR view for more than a week we warned last Friday (26 Oct, spot at 1.1375), “short-term indicators are at severely oversold levels and it is unlikely EUR can maintain the pace of its current decline”. We added, “a dip below 1.1350 is not ruled out but at this stage, the prospect for a sustained break below the year-to-date low of 1.1297 is not that high”. EUR dipped to a low of 1.1332 during London hours on Friday before staging a robust rebound and closed higher for the day (NY close of 1.1401, +0.23%). The price action reinforces our view and we continue to see low risk for a break of 1.1297. That said, only a move above the 1.1450 ‘key resistance’ (no change in level) would indicate that the ‘negative’ phase has ended and a short-term bottom is in place”.
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