FX Strategists at UOB Group do not rule out EUR/USD slipping back below the 1.20 mark in the next weeks.
24-hour view: “We highlighted yesterday that ‘there is room for EUR to dip below 1.2050’. We added, ‘a sustained decline below this level appears unlikely for now and EUR is unlikely to challenge the major support at 1.2000’. While our expectation for a weaker EUR was not wrong, the decline was sharper than expected as EUR dropped to 1.2010 before rebounding. From here, oversold conditions coupled with waning momentum suggest EUR is unlikely to weaken today. EUR is more likely to consolidate and trade between 1.2015 and 1.2075.”
Next 1-3 weeks: “We have held a negative view in EUR since last Thursday. Yesterday (02 Feb), we highlighted that ‘odds for EUR to move clearly below 1.2050 have increased’. We noted that ‘the support below 1.2050 is at 1.2000 followed by 1.1965’. EUR subsequently cracked 1.2050 and plummeted to 1.2010 before recovering to close at 1.2042 (-0.14%). Downward momentum has improved and further EUR weakness is likely. That said, oversold shorter-term conditions could lead to a couple of days of consolidation first. Looking ahead, as long as 1.2105 (‘strong resistance’ level was at 1.2140 yesterday) is not breached, a break of 1.2000 would not be surprising and would open up the way for EUR to move lower to 1.1965.”
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