EUR/USD: Still expected to weaken

The Euro (EUR) could drop below the 1.0555 low; deeply oversold conditions suggest 1.0500 is unlikely to come under threat. In the longer run, EUR is still expected to weaken; the 1.0500 level may not come into view so soon, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The 1.0500 level may not come into view so soon

24-HOUR VIEW: “Two days ago, we expected EUR to weaken, but we were of the view that ‘the major support at 1.0600 could be out of reach.’ After EUR dropped to a low of 1.0594, we indicated yesterday that ‘barring a break above 1.0660, EUR could decline further to 1.0585 before stabilisation can be expected.’ We added, ‘This time around, the next major support at 1.0555 is likely out of reach.’ During NY session, EUR popped briefly to 1.0653, and then plummeted to 1.0555. EUR closed on a weak note at 1.0563 (-0.56%). Despite being deeply oversold, the weakness still has not stabilised. That said, the potential for any further decline could be relatively limited. From here, EUR could dip below 1.0555 but the next major support at 1.0500 is unlikely to come under threat. On the upside, a breach of 1.0610 (minor resistance is at 1.0590) would suggest the weakness in EUR has stabilised.”

1-3 WEEKS VIEW: “We have maintained a negative EUR view since late last week. As we tracked the decline, we highlighted yesterday (13 Nov, spot at 1.0620) that ‘downward remains strong, and the focus is at 1.0555.’ We pointed out that ‘The next technical objective below 1.0555 is at 1.0500.’ EUR fell and reached 1.0555 in NY trade. While we continue to expect a weaker EUR, note that after declining sharply for a few days, conditions are deeply oversold, and 1.0500 may not come into view so soon. Overall, only a breach of 1.0670 (‘strong resistance’ level was at 1.0705 yesterday) would mean that EUR is not weakening further.”

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