EUR/USD risks further downside near term – UOB

The outlook for EUR/USD remains negative and could still drop to the 0.9850 region ahead of 0.9800 in the next weeks, according to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘the rebound in EUR has scope to extend but is unlikely to break 1.0005’. While our view was not wrong as EUR rose to 0.9986 during early London hours, we did not expect the subsequent sharp drop from the high (EUR plummeted to a fresh low of 0.9864). The rapid drop appears to be running ahead of itself but there is scope for EUR to test 0.9850. For today, the next support at 0.9800 is unlikely to come under threat. On the upside, a breach of 0.9955 (minor resistance is at 0.9930) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “Last Friday (02 Sep, spot at 0.9945), we highlighted that the risk for EUR has shifted to the downside. We added, EUR has to close below the major support at 0.9900 before a sustained decline is likely. After EUR dropped to 0.9875 and rebounded strongly, we highlighted yesterday that the odds for EUR to close below 0.9900 have diminished. EUR subsequently rose to 0.9986, plummeted to 0.9862 before rebounding to close at 0.9902 (-0.24%). While EUR did not close below 0.9900, shorter-term momentum has improved. In other words, the risk for EUR is still on the downside. The levels to monitor are at 0.9850 and 0.9800. Resistance wise, a breach of 0.9980 (‘strong resistance was at 1.0005 yesterday) would indicate that the downside risk has dissipated.”