EUR/USD: Door open to extra pullbacks – UOB

FX Strategists at UOB Group noted EUR/USD could now slip back to the 1.1500 region in the next weeks.

Key Quotes

24-hour view: “We expected EUR to weaken yesterday but we were of the view that ‘any decline is unlikely to break last week’s low near 1.1560’. However, EUR not only cracked 1.1560, it also breached next major support at 1.1530 (low of 1.1527). While oversold, the weakness in EUR has not stabilized. From here, EUR could drop to 1.1520 first before a more sustained rebound can be expected. The next support at 1.1500 is likely out of reach for today. On the upside, a break of 1.1585 (minor resistance is at 1.1570) would indicate that the current weakness has stabilized.”

Next 1-3 weeks: “We have expected EUR to weaken since early last week. Our view was not wrong but after EUR dropped to 1.1561 and rebounded, we highlighted on Monday (04 Oct, spot at 1.1605) that ‘downward momentum has slowed and the odds for EUR to move to 1.1530 have diminished’. Yesterday (06 Oct). EUR lurched lower and cracked 1.1530, albeit by a few pips (low of 1.1527). Despite the break of the major support, downward momentum has not improved by all that much. That said, further EUR weakness is likely but from here, we have a relatively modest ‘target’ of 1.1500. Overall, the downside risk in EUR is deemed intact as long as it does not move above 1.1605 (‘strong resistance’ level previously at 1.1655).”