EUR/USD: Extra decline not ruled out – UOB

FX Strategists at UOB Group noted EUR/USD still risks further retracements in the near term.

Key Quotes

24-hour view: “While we expected EUR to weaken yesterday, we did not anticipate the high volatility as EUR nosed-dived to 1.1105 before snapping back up to close at 1.1191 (-1.04%). The sharp bounce from the NY low of 1.1105 appears to have room to extend but a sustained rise above 1.1250 is unlikely (next resistance is at 1.1280). Support is at 1.1170 followed by 1.1130.”

Next 1-3 weeks: “Yesterday (24 Feb, spot at 1.1285), we highlighted that downward momentum has improved and the chance for EUR to move to the next major support at 1.1240 has increased. However, we did not anticipate the manner by which EUR sliced through 1.1240 and plunged to a 21-month low of 1.1105. Despite the subsequent sharp rebound from the low, further EUR weakness is not ruled out. That said, shorter-term conditions are deeply oversold and EUR could trade above 1.1105 for a couple of days first. Only a break of 1.1310 (‘strong resistance’ level was at 1.1360 yesterday) would indicate that the weak phase in EUR that started early last week has run its course. Looking ahead, the next support below 1.1105 is at 1.1080.”