EUR/USD: Further losses still likely near term – UOB

FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang suggested EUR/USD could still drop further and test 1.0100 ahead of 1.0000 in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the weakness in EUR has not stabilized’ and we were of the view that ‘there is scope for EUR to weaken to 1.0200’. The anticipated weakness exceeded our expectations as EUR dropped to a low of 1.0160. Downward momentum has slowed a tad and this coupled with deeply oversold conditions suggests EUR is unlikely to weaken much further. From here, EUR could dip to 1.0145 first before stabilization is likely. For today, EUR is unlikely to challenge the next major support at 1.0100. On the upside, a breach of 1.0260 (minor resistance is at 1.0220) would indicate that the current weakness in EUR has stabilized.”

Next 1-3 weeks: “Yesterday (06 Jul, spot at 1.0265), we highlighted that solid downward momentum is likely to lead to further EUR weakness. We indicated, the next levels to focus on are at 1.0200 and 1.0100. EUR subsequently took out 1.0200 as it dropped to a low of 1.0160. Further EUR weakness still appears likely even though oversold conditions could slow the pace of any further decline. Overall, only a break of 1.0310 (‘strong resistance’ level was at 1.0380 yesterday) would indicate the downside risk in EUR that started one week ago has run its course. Looking ahead, the next support below 1.0100 is at the rather critical psychological level of 1.0000.”