FX Strategists at UOB Group noted EUR/USD faces a potential deeper pullback below the 1.2050 level.
24-hour view: “We highlighted yesterday that ‘the bias remains on the downside even though 1.2050 is a solid support and may not be easy to crack’. However, EUR recovered quickly after touching a low of 1.2079 (high has been 1.2141). Downward pressure has eased and for today, EUR is likely to trade sideways, expected to be within a 1.2085/1.2150 range.”
Next 1-3 weeks: “We have held the same view since last Friday (22 Jan, spot at 1.2165) where we expect EUR to ‘trade between 1.2080 and 1.2250 for a period of time’. Since then, EUR has traded mostly sideways but it dropped sharply to 1.2056 yesterday. Shorter-term downward momentum is improving and the risk is shifting to the downside. That said, EUR has to close below 1.2050 before a sustained decline can be expected. The odds for such a move are quite high unless EUR moves above 1.2180 within these few days. Looking ahead, the next support below 1.2050 is at 1.2000.”
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