EUR/USD faces extra downside below 1.1685 – UOB

FX Strategists at UOB Group noted EUR/USD risks a extra losses below 1.1685 in the next weeks.

Key Quotes

24-hour view: “We expected EUR to ‘weaken further’ yesterday but held the view that ‘1.1735 is unlikely to come into the picture’. The subsequent weakness in EUR exceeded our expectations as it dropped to a low of 1.1716. While downward momentum has waned somewhat, it appears too early to expect a sustained recovery. From here, there is room for EUR to test the support at 1.1710 first before a stronger rebound can be expected. For today, the next support at 1.1685 is unlikely to come under threat. Resistance is at 1.1780 but only a break of 1.1805 would indicate the current downward pressure has eased.”

Next 1-3 weeks: “Yesterday, we indicated that ‘near-term risk is tilted to the downside but any weakness is viewed as part of a 1.1710/1.1860 range’. We added, EUR ‘is unlikely to move below 1.1710 in a sustained manner’. The rapid manner by which EUR approaches the bottom of the expected range was not exactly expected (overnight low of 1.1716). The improvement in downward momentum suggests the risk remains on the downside but EUR has to close below 1.1685 before a more sustained decline can be expected (next support is at 1.1610). At this stage, the prospect for such a move appears to be quite high as long as EUR does not move above 1.1835 within these 1 to 2 days (‘strong resistance’ level).”