Further downside to the 1.0930 region in EUR/USD is not ruled out, according to FX Strategists at UOB Group.
Key Quotes
24-hour view: “While we expected EUR to move lower last Friday, we were of the view “1.1025 is likely out of reach”. The subsequent weakness exceeded our expectation by a wide margin as EUR not only sliced through 1.1025 but also cracked the major 1.1000 support. The rapid drop to a low of 1.0961 appears to be running ahead of itself and further sustained decline is unlikely for today. EUR is more likely to consolidate its loss and trade sideways, expected to be within a 1.0960/1.1025 range”.
Next 1-3 weeks: “We detected the weakened underlying tone in EUR last Friday (30 Aug, spot at 1.1060) and held the view that EUR is likely to “probe the bottom of the expected 1.1000/1.1130 range first”. However, instead of ‘probing’ 1.1000, EUR crashed through this strong support level and hit a 27-month low of 1.0961. The sudden lurch lower and the subsequent weak daily closing in NY (1.0989, -0.59%) has resulted in a rapid improvement in downward momentum. From here, EUR could extend its weakness to the next support at 1.0930. However, oversold short-term conditions could lead to a couple of days of consolidation first. Resistance is at 1.1025 but only a break of 1.1060 (‘key resistance’) would indicate that the current weakness in EUR has stabilized”.
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