FX Strategists at UOB Group expect EUR/USD to grind lower in the next weeks.
24-hour view: “We expected EUR to weaken last Friday but we were of the view that ‘any weakness is likely limited to a retest of the 1.2110 level’. We highlighted that ‘the next support at 1.2080 is unlikely to come under threat’. The subsequent weakness in EUR exceeded our expectation as it breached 1.2080 (low of 1.2072) before closing on a weak note at 1.2078 (-0.64%). Downward momentum is strong and further EUR weakness is likely. That said, oversold conditions suggest that the major support at 1.2010 is likely out of reach for now (1.2040 is already quite a strong level). Resistance is at 1.2100 followed by 1.2120.”
Next 1-3 weeks: “We have held a negative view in EUR since early last week. We noted last Friday that ‘shorter-term momentum is building up again and there is still chance for EUR to edge down towards the solid support at 1.2080’. We added, ‘barring a sudden surge in momentum, the prospect for a sustained decline below this level is not high’. The subsequent strong surge in momentum came as a surprise as EUR cracked 1.2080 and dropped to 1.2072. In view of the vastly improved momentum, further EUR weakness is likely. The next level to focus on is at last September’s peak (resistance-turned-support) near 1.2010. Overall, the current negative phase could remain intact for a while more unless EUR moves above 1.2170 (‘strong resistance’ level was at 1.2220 last Friday).”