EUR/USD: Downside momentum looks mitigated – UOB

In opinion of UOB Group’s FX Strategists, further retracements in EUR/USD appears to have lost some traction in the near-term.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘there is scope for EUR to dip below 1.2020 first before a recovery can be expected’. We added, ‘the next support at 1.1985 is unlikely to come under threat’. While our view was not wrong as EUR dropped to 1.1990, we did not anticipate the swift and sharp rebound from the low (overnight high of 1.2094). The recovery could extend but any advance is likely limited to a test of 1.2110. The strong resistance at 1.2135 is unlikely to come into the picture. Support is at 1.2060 followed by 1.2030.”

Next 1-3 weeks: “On Monday (01 Mar, spot at 1.2085), we highlighted that ‘downside risk has increased and EUR could drop to 1.2020’. EUR subsequently dropped to 1.2026 and we noted yesterday (02 Mar) that ‘risk is still on the downside and the next support below 1.2020 is at 1.1985’. EUR came close to 1.1985 as it dropped to 1.1990 during London hours yesterday before staging a sharp rebound. Downward momentum has waned but as long as 1.2135 (no change in ‘strong resistance’ level) is intact, there is still chance, albeit a slim one for EUR to make another run lower. That said, in order to rejuvenate the flagging momentum, EUR has to move and stay below 1.2030 within these 1 to 2 days or a break of 1.2135 would not be surprising.”