EUR/USD: Next on the downside comes 1.0430 – UOB

Further decline could see EUR/USD slip back to the 1.0430 region in the near term, according to Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

24-hour view: While we expected EUR to decline yesterday, we were of the view that “The major support at 1.0515 is unlikely to come into view.” We did not anticipate the sharp selloff as EUR broke below 1.0515 and dropped to within a few pips of the year’s low of 1.0482 (NY low of 1.0486). The sharp drop is severely oversold, but has not stabilised. There is room for EUR to drop further to 1.0470 before stabilisation is likely. This time around, we hold the view that the next support at 1.0430 is unlikely to come into view. Resistance is at 1.0530; if EUR breaks above 1.0555, it would mean that the weakness has stabilised. 

Next 1-3 weeks: Last Thursday (21 Sep, spot at 1.0655), we highlighted that “EUR is likely to trade in a range of 1.0590/1.0730.” We added, “if it breaks below 1.0590, it will likely lead to a sustained decline to 1.0515.” After EUR broke below 1.0590, in our latest narrative from two days ago (26 Sep, spot at 1.0590), we pointed out that the price action suggests that EUR “is likely to weaken to 1.0515 in the coming days.” Yesterday (27 Sep), EUR broke below 1.0515 and dropped to a low of 1.0486. The price action continues to suggest EUR weakness. The next level to watch is at 1.0430. On the upside, a breach of 1.0585 (‘strong resistance’ level was at 1.0650 previously) would indicate that EUR is not weakening further.