EUR/USD deeper retracement on the cards – UOB

The pair’s stance remains neutral ahead of a potential deeper pullback, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that “a deeper probe towards 1.2260 would not be surprising” but were of the view that the major 1.2235 support is “unlikely to come into the picture”. In line with expectation, EUR dropped to an overnight low of 1.2252 before staging a mild recovery. While the downward momentum is not strong, the weak undertone suggests that the immediate pressure remains on the downside. That said, any further decline is expected to encounter solid support at 1.2235, followed closely by another strong level near 1.2200. On the upside, only a move back above 1.2315 would indicate that that the immediate downward pressure has eased (minor resistance is at 1.2295)”.

Next 1-3 weeks: “We have held a neutral stance for about a month now and since then; EUR has been trading within a relatively narrow 1.2237/1.2476 range. That said, shorter-term price action has been erratic and the outlook remains mixed. However, EUR closed on a soft note in NY yesterday and the weakened undertone increases the risk of a move below the previously expected 1.2235/1.2475 consolidation range. While a dip below 1.2235 would not be surprising, the 1.2153 low seen in early March is another major support and based on the current lackluster momentum, any weakness is expected to encounter solid support near this level. Overall, EUR is expected to stay under mild downward pressure from here unless it can move back above 1.2420”.