EUR/USD risks a deeper decline below 1.0340 – UOB

According to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, EUR/USD could extend the downtrend to 1.0300 and 1.0200 once it clears 1.0340.

Key Quotes

24-hour view: “While we expected EUR to weaken yesterday, we were of the view that ‘the chance for a break of the major support at 1.0470 is not high’. However, EUR cracked the major support and plunged to a low of 1.0352. The deeply oversold weakness has scope to drop below 1.0340 first before stabilization can be expected (next support is at 1.0300). Resistance is at 1.0430 followed by 1.0460.”

Next 1-3 weeks: “Last Friday (06 May, spot at 1.0540), we highlighted that EUR has to close below the solid support at 1.0470 before a sustained decline is likely. Yesterday (12 May, spot at 1.0515), we indicated that ‘there is no change in our view for now even though shorter-term downward momentum has weakened a tad and the chance for EUR to close below 1.0470 has increased slightly’. That said, we did expect the reaction upon the break of 1.0470 as EUR crashed to a low of 1.0352. From here, a break of the 2017 low near 1.0340 could trigger further sharp decline. The next support levels are at 1.0300 and 1.0200. Overall, only a break of 1.0490 (‘strong resistance’ level was at 1.0605 yesterday) would indicate that the current weakness in EUR has stabilized.”