EUR/USD looks consolidative very near term – UOB

FX Strategists at UOB Group remain constructive on EUR/USD, although some consolidation is likely in the next sessions.

24-hour view: “We highlighted yesterday “the rally is deep in overbought territory and further sustained gain is not likely”. We added, “EUR is more likely to consolidate and trade sideways within a 1.1130/1.1180 range”. EUR subsequently traded between 1.1135 and 1.1179, relatively close to our expected sideway-trading range. The current movement is still viewed as part of a consolidation phase even though the slightly weakened underlying tone suggests a lower trading range of 1.1120/1.1170”.

Next 1-3 weeks: “We maintain our positive outlook for EUR and highlighted last Friday (18 Oct, spot at 1.1120) that “the focus is firmly at the 1.1165 resistance now”. EUR subsequently rose to 1.1172 before ending the day (and the week) on a strong note (NY close of 1.1169, +0.42%). The current EUR rally still appears ‘healthy’ and a move above 1.1200 would not be surprising but 1.1250 is a much stronger resistance and may not yield as easily. On the downside, only a break of 1.1070 (‘strong support’ level slightly higher than 1.1050 previously) would indicate that the current positive phase in EUR that started more than a week ago (see annotations in chart below) has run its course”.