UOB Group currency strategists note that the EUR / USD risks a deeper pullback following a breakout of 1.1700 in the short term.
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24 hour view: “We were not expecting the steep decline yesterday that sent EUR / USD to a low of 1.1708. While rapidly approaching oversold, EUR / USD weakness could break the very solid support at 1.1700. The next support is 1.1670. All in all, EUR / USD is expected to move under pressure unless it can break above 1.1750 (minor resistance is 1.1730).
Next 1-3 weeks: “Our view from two days ago (Aug 16, EUR / USD at 1.1795) where EUR / USD could break through 1.1845 was quickly proven wrong as it plunged yesterday and broke our ‘strong support’ level at 1.1735 (low of 1.1708) Strong and rapid improvement in momentum to the downside has shifted risk to the downside. A breakout of the solid support at 1.1700 would open the way for EUR / USD to turn down to 1.1670 (next support is at 1.1640). Downside risk is considered intact as long as EUR / USD remains below the “strong resistance” level (currently at 1.1775).
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