EUR/USD is now focused on 1.1200 – UOB

FX Strategists at UOB Group noted a break below the 1.1200 handle could trigger a quick move lower.

Key Quotes

24-hour view: “While our anticipation for a break of the major 1.1295/00 support was correct, the extent and pace of the subsequent decline came as a surprise. We were of the view that any weakness could be limited to 1.1270 but EUR plunged and even managed to edge below the next major support at 1.1220 (low of 1.1213). The down-move is deep in oversold territory now but there is no sign of stabilization just yet and EUR could try to crack 1.1200 from here (next support is at 1.1165). Only a move back above 1.1270 would indicate that the current weakness has stabilized (minor resistance is at 1.1245)”.

Next 1-3 weeks: “While we have held the view that there is “scope for EUR to retest the major 1.1300 support” since last Friday (09 Nov, spot at 1.1365), the manner of which it crashed below this level yesterday (12 Nov) came as a surprise. We indicated yesterday (12 Nov, spot at 1.1325) a “NY closing below this major support would suggest EUR could weaken further to the next support at 1.1220” and this scenario is supposed to take days to evolve and not hours (EUR hit a low of 1.1213 during late NY hours). To put it in perspective, over the past 3 trading days, EUR has lost a whopping -1.81%. The last time we saw a decline of similar magnitude was back in June when the political upheavals in Italy were at its peak. From here, we are seeing strong support at 1.1200 but a clear break of this level could open up the way for further rapid drop to 1.1130, 1.1100. On the upside, the ‘key resistance’ at 1.1410 has moved sharply lower to 1.1350”.