EUR/USD risks a move to 1.2020 – UOB

FX Strategists at UOB Group noted EUR/USD faces the probability of a drop to the 1.2020 levels in the next weeks.

Key Quotes

24-hour view: “While our expectation for EUR to weaken last Friday was correct, we underestimated the downside momentum as EUR plunged to 1.2060 (we were of the view any weakness is likely limited to 1.2100). The sharp and rapid decline is severely oversold and further sustained weakness is unlikely. That said, there is room for EUR to dip below 1.2060 but any weakness is viewed as part of a 1.2050/1.2130 range. In other words, EUR is not expected to move below 1.2050 on a sustained basis.”

Next 1-3 weeks: “Last Friday (26 Feb, spot at 1.2155), we highlighted that ‘build-up in momentum has fizzled out’ and we expected EUR to ‘trade between 1.2060 and 1.2230’. However, we did not anticipate the rapid manner by which EUR approached the bottom of the range (EUR dropped to 1.2060 during late NY session on Friday). The price actions have increased the downside risk for EUR. While oversold shorter-term conditions could lead to consolidation first, barring a move above 1.2170 (‘strong resistance’ level), there is high chance that EUR could drop to 1.2020.”