UOB Group currency strategists note that there is still a chance that the EUR / USD will pull back below the 1.2000 level in the short term.
Key Comments:
24 hour view: “We highlighted yesterday that ‘the strong and rapid bounce could extend, but any advance is likely to be limited to a test of 1.2110’. While our view was not wrong, as EUR / USD rose to 1.2112, we do not anticipate the subsequent sharp decline. While bearish momentum has not improved much, the EUR / USD bias is tilting lower towards 1.2020. Major support at 1.1985 is unlikely to enter the scene (there is another minor support at 1.2000). Resistance is at 1.2085 followed by 1.2110 “.
Next 1-3 weeks: “On Monday (March 1, EUR / USD at 1.2085), we highlighted that ‘downside risk has increased and EUR / USD could fall to 1.2020”. Subsequently, the EUR / USD fell to 1.2026 and yesterday (March 2) we noticed that ‘the risk remains to the downside and the next support below 1.2020 is at 1.1985’. EUR / USD approached 1.1985 as it fell to 1.1990 during the London session yesterday before making a strong rebound. The bearish momentum has faded, but as long as 1.2135 (unchanged at ‘strong resistance’ level) is intact, there is still a chance, albeit slim, that EUR / USD will decline again. That said, to rejuvenate the weakening momentum, the EUR / USD has to move and stay below 1.2030 in these 1-2 days or a breakout of 1.2135 would not be surprising. “
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