EUR/USD: Upside pressure alleviated below 1.1390 – UOB

In opinion of FX Strategists at UOB Group, the upside momentum in EUR/USD could lose traction below the 1.1390 level.

Key Quotes

24-hour view: “Last Friday, we highlighted that ‘upward momentum has waned somewhat and this coupled with overbought conditions suggests that EUR is unlikely to strengthen much further’ and we expected EUR to ‘trade between 1.1435 and 1.1485’.  EUR subsequently rose to 1.1482 before dropping sharply to close at 1.1414 (-0.34%). The swift and sharp drop appears to be running ahead of itself and the risk of a sustained decline from here is not high. Overall, EUR is more likely to trade sideways at these lower levels, expected to be between 1.1390 and 1.1445.”

Next 1-3 weeks: “We have expected EUR to strengthen since last Wednesday (12 Jan, 1.1370). In our latest narrative from Friday (14 Jan, spot at 1.1455), we held the view that ‘overbought shorter-term conditions could lead to a couple of days of consolidation first’. However, instead of consolidating, EUR pulled back sharply and dropped to a low of 1.1397 during NY session. Upward momentum is beginning to wane and a break of 1.1390 (no change in ‘strong support’ level from Friday) would indicate that 1.1515 is out of reach this time round. In order to rejuvenate the flagging momentum, USD has to move and stay above 1.1445 within these 1 to 2 days or a break of 1.1390 would not be surprising.”