EUR/USD risks further declines while below the 1.0820 level for the time being, note UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leng.
24-hour view: “After EUR fell to a low of 1.0746 on Wednesday, we indicated yesterday that ‘the price actions have resulted in an increase in downward momentum even though EUR is unlikely to threaten the next major support at 1.0700 today’. In line with our expectations, EUR continued to weaken yesterday but did not break the major support at 1.0700 (low has been 1.0706). While severely oversold, EUR could dip below 1.0700 today but it is unlikely to threaten the next support at 1.0650. On the upside, a breach of 1.0760 (minor resistance is at 1.0740) would indicate that EUR is not ready to head below 1.0700.”
Next 1-3 weeks: “We have expected EUR to weaken since more than 2 weeks ago. As EUR slumped, in our latest narrative from yesterday (25 May, spot at 1.0750), we stated, ‘As long as 1.0820 is not breached, there is room for EUR to weaken further to 1.0700’. In London trade, EUR dropped to a low of 1.0706. While we do not rule out a break of 1.0700, the selloff over the past 2 weeks appears to be overextended, both in terms of time and price. To put it another way, while we see room for EUR to weaken further, it remains to be seen if it has enough momentum to break clearly below the next support at 1.0650. All in all, the weak phase in EUR is intact as long as it stays below 1.0790 (‘strong resistance’ level was at 1.0820 yesterday).”
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