EUR/USD: Sustained pullback seen below 0.9870 – UOB

FX Strategists at UOB Group Quek Ser Leang and Peter Chia suggest EUR/USD risks further losses if 0.9870 is cleared.

Key Quotes

24-hour view: “We highlighted last Friday that the outlook for EUR is ‘mixed’ and we expected EUR to ‘trade within a range of 0.9925/1.0020’. However, EUR spiked to a high of 1.0089 before plummeting to 0.9945. EUR extended its decline during early Asian hours and while EUR could drop below 0.9900, the next support at 0.9870 is unlikely to come into the picture. On the upside, a breach of 0.9980 (minor resistance is at 0.9955) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “EUR spiked above our ‘strong resistance’ level of 1.0035 last Friday (high of 1.0089) before plummeting to end the day at 0.9961 (-0.13%). The break of the ‘strong resistance’ level indicates that the EUR weakness that started about 2 weeks ago has ended. While shorter-term downward momentum still suggests downside risk, EUR has to break below 0.9870 before a sustained decline is likely. The next support is at 0.9825. The odds for EUR to break clearly 0.9870 are not high for now but would remain intact as long as it does not move above 1.0015 within these few days.”