EUR/USD: Further weakness loses traction – UOB

24-hour view: We indicated last Friday that EUR “could drop below the major support at 1.0965.” However, we were of the view that “it might not be able to maintain a foothold below this level.” We also indicated that “The next support at 1.0920 is unlikely to come into view.” While our view was not wrong, as EUR dropped to a low of 1.0942, we did not quite expect the sharp rebound from the low (high was 1.1047 in NY trade). Downward pressure has eased, and EUR appears to have moved into a consolidation phase. Today, we expect EUR to trade between 1.0980 and 1.1055. 

Next 1-3 weeks: We highlighted last Friday (28 Jul, spot at 1.0985) that EUR must break and stay below the major support at 1.0965 before further weakness is likely. While EUR then broke below 1.0965, it rebounded strongly from 1.0942 and ended the day higher by 0.38% (NY close of 1.1015). Downward momentum has eased somewhat, but only a breach of 1.1070 (no change in ‘strong resistance’ level from last Friday) would indicate that EUR is not weakening further. Looking ahead, the next support is at 1.0920. Meanwhile, overbought short-term conditions could lead to a couple of days of consolidation.