EUR/USD: Downside pressure looks mitigated – UOB

Further decline in EUR/USD seems to be losing traction, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: We did not anticipate the sudden increase in volatility as EUR dipped briefly to 1.0780 in NY trade and then lifted off and soared to 1.0891. While overbought, the rapid rise could test 1.0915 before easing. The major resistance at 1.0955 is highly unlikely to come under threat. Support is at 1.0855, followed by 1.0835.

Next 1-3 weeks: After EUR fell to 1.0764 and rebounded, in our latest narrative from Monday (28 Aug, spot at 1.0795), we highlighted that EUR could consolidate for a couple of days before declining to 1.0730. We added, “if EUR breaches the ‘strong resistance’ level at 1.0875, it would indicate that the weakness in EUR that started early last week has stabilised.” Yesterday, EUR broke above 1.0875 (high has been 1.0891). Not only has the weakness in EUR stabilised, but upward momentum has also built. EUR is likely to trade with an upward bias for now. However, it remains to be seen if there is enough momentum for it to break the major resistance level at 1.0955 (see updated 1-3 months view below). The upward bias is intact as long as EUR stays above 1.0805 (‘strong support’ level) in the next few days.