EUR/USD: Increasing bets for a breakdown of 2019 lows – UOB

FX Strategists noted that odds for EUR/USD to break below YTD low at 1.0925 have increased.

24-hour view: “The sharp decline in EUR that hit an overnight low of 1.0936 came as a surprise (NY close at 1.0941, -0.70%). While the sudden and rapid drop appears to be running ahead of itself, the weakness is not showing sign of stabilization just yet. From here, EUR could test the year-to-date low near 1.0925 first before stabilizing. At this stage, the prospect for a break of the next support at 1.0900 is not that high. On the upside, only a move above 1.0990 (minor resistance is at 1.0970) would indicate that the current weakness has stabilized”.

Next 1-3 weeks: “We detected the weakened underlying tone in EUR on Tuesday (24 Sep, spot at 1.0995) and highlighted that EUR is likely to “edge lower” to the bottom of the expected 1.0925/1.1100 range first. While our expectation for EUR to move down was not wrong, instead of “edging lower”, EUR plunged yesterday (25 Sep) and registered the largest 1-day decline in 8 weeks (1.0941, -0.70%). Downward momentum has picked up considerably and the risk of a break of the year-to-date low of 1.0925 has increased. From here, a NY closing below 1.0925 would suggest EUR is ready to tackle the next support at 1.0870. All in, EUR is expected to stay under pressure unless it can move above the ‘strong resistance’ at 1.1010 within these few days”.