EUR/USD: Bulls can test 1.0580 short term

Momentum has slowed somewhat; any further decline is likely part of a lower trading range of 1.0490/1.0580. In the longer run, price action continues to suggest EUR weakness; the next support level is at last year’s low, near 1.0450, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Next support level is at last year’s low at 1.0450

24-HOUR VIEW: “Following the drop in EUR to a low of 1.0555 two days ago, we highlighted yesterday that ‘Despite being deeply oversold, the weakness still has not stabilised.’ We held the view that EUR ‘could dip below 1.0555 but the next major support at 1.0500 is unlikely to come under threat.’ However, EUR broke below 1.0500, reached a low of 1.0496 and then rebounded to close at 1.0530. Conditions remain oversold, but the weakness still has not quite stabilised just yet. That said, as momentum has slowed somewhat, any further decline is likely part of a lower trading range of 1.0490/1.0580. In other words, EUR is unlikely to break clearly below 1.0490.”

1-3 WEEKS VIEW: “We have maintained a negative EUR view for more than a week now. Yesterday (14 Nov, spot at 1.0565), we indicated that EUR ‘is still expected to weaken.’ However, we indicated that given the oversold conditions, ‘the 1.0500 level may not come into view so soon.’ We also indicated that ‘only a breach of 1.0670 (‘strong resistance’ level) would mean that EUR is not weakening further.’ We underestimated the EUR weakness as it fell below 1.0500 (low has been 1.0496). The price action continues to suggest EUR weakness, even though caution is warranted given the deeply oversold conditions. The next support is at last year’s low, near 1.0450. On the upside, the ‘strong resistance’ level has moved lower to 1.0610 from 1.0670.”

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