In opinion of FX Strategists at UOB Group, the idea of EUR/USD testing the 1.1390 region appears to be losing some traction.
Key Quotes
24-hour view: “Our view for EUR to ‘continue to consolidate’ was incorrect as it traded in a relatively volatile manner. EUR initially dropped to 1.1239 before soaring to a high of 1.1364. While upward momentum has improved and there is scope for EUR to edge nearer to the major 1.1390 resistance, it is left to be seen if EUR can move and stay above this key level. Support is at 1.1310 followed by 1.1270.”
Next 1-3 weeks: “We highlighted last Friday (05 Jun, spot 1.1355) that ‘if EUR can clearly move above 1.1390, it would greatly increase the odds for a move to the March’s peak near 1.1495’. We added, ‘in order to maintain the current impulsive momentum (amid severely overbought conditions), EUR could not afford to dither or the risk of a short-term top would increase quickly’. EUR subsequently retreated after touching 1.1383 and traded in a relatively quiet manner yesterday (08 Jun). Upward momentum is starting to wane and would continue to do so unless EUR heads north soon. In other words, the prospect for EUR to move above 1.1390 is beginning to dim. On the downside, a breach of 1.1220 (no change in ‘strong support’ level) would mark the end of the positive phase that started more than a week ago and the beginning of a consolidation phase.”
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