EUR/USD now looks to a breakout of 1.1390 – UOB

FX Strategists at UOB Group noted EUR/USD could re-test the vicinity of 1.1500 if 1.1390 is cleared.

Key Quotes

24-hour view: “We highlighted yesterday that ‘only a breach of 1.1180 would indicate that the current upward pressure has eased’. However, we held the view that the ‘major resistance at 1.1285 is likely out of reach’. EUR subsequently drifted lower to 1.1193 before blasting off after ECB’s announcement. The strong surge not only sliced through 1.1285 but cracked another major resistance at 1.1330 (high of 1.1361). While deep in overbought territory, the rally appears to have enough fuel to push above the major resistance at 1.1390. For today, EUR may not be able to maintain a toe-hold above this level. Support is at 1.1310 followed by 1.1285.”

Next 1-3 weeks: “While we have held a positive view in EUR for more than a week now, our latest narrative from yesterday (04 Jun, spot at 1.1230) was ‘further EUR strength to 1.1285 is not ruled out but the prospect for extension to 1.1330 is not that high for now’. However, the massive rally after ECB’s announcement blast past both levels easily (overnight high of 1.1361). From here, there is a relatively long-term resistance at 1.1390 and if EUR can move clearly above this level, it would greatly increase the odds for EUR to move towards the March’s peak near 1.1495. In order to maintain the current impulsive momentum (amid severely overbought conditions), EUR could not afford to dither or the risk of a short-term top would increase quickly. In other words, EUR has to keep pushing for new highs over the next several days. On the downside, a breach of 1.1230 (‘strong support’ level was at 1.1140 yesterday) would indicate that the current rally has run its course.”