EUR/USD could slip back below 1.0800 – UOB

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang note EUR/USD risks extra weakness in the next few weeks.

Key Quotes

24-hour view: Yesterday, we expected EUR to trade in a range of 1.0870/1.0915. We did not anticipate the spike in volatility. After rising to a high of 1.0930, EUR plummeted to a low of 1.0831 and then closed at 1.0844 (-0.44%). The rapid decline has gathered momentum, and EUR is likely to weaken further today. A clear break of the major support at 1.0830 could lead to a drop to 1.0790 before the risk of a rebound increases. Resistance is at 1.0870, followed by 1.0890. 

Next 1-3 weeks: We highlighted yesterday that “downward momentum is beginning to wane, albeit tentatively.” We held the view that “only a breach of 1.0930 would indicate that EUR is not ready to head lower to 1.0830.” We did not quite expect the subsequent price actions as EUR rose to 1.0930 (EUR did not break clearly above this level), then fell sharply and came within a pip of 1.0830 (low of 1.0831). Downward momentum has been ‘boosted’, and a break of 1.0830 is likely. The next level to focus on below 1.0830 is a considerable support level near 1.0790. On the upside, the ‘strong resistance’ level of 1.0930 has moved slightly lower to 1.0915. A breach of the ‘strong resistance’ level would mean that the weakness in EUR has stabilised.