UOB Group currency strategists note that the EUR / USD could fall back to 1.1965 if it falls below the 1.2000 level In the next weeks.
Key Comments:
24 hour vision: “We highlighted yesterday that ‘oversold conditions coupled with waning momentum suggest EUR / USD is unlikely to weaken.’ We added that EUR / USD is more likely to ‘consolidate and trade between 1.2015 and 1.2075’. Subsequently, EUR / USD fell to 1.2002 before bouncing to close little changed for the day (1.2034, -0.07%). Conditions remain oversold and the risk of EUR / USD breaking the main support at 1.2000 is not high. For today, the EUR / USD is more likely to move sideways between 1.2015 and 1.2070 “.
Next 1-3 weeks: “We have had a negative view on the EUR / USD since last Thursday. Yesterday (02 Feb), we highlighted that ‘the odds of EUR / USD moving clearly below 1.2050 have increased’. We note that ‘support below 1.2050 is at 1.2000 followed by 1.1965’. Thereafter, the EUR / USD broke at 1.2050 and tumbled to 1.2010 before recovering to close at 1.2042 (-0.14%). Bearish momentum has improved and EUR / USD is likely to weaken. That said, short-term oversold conditions could lead to a couple of days of consolidation first. Looking ahead, as long as it doesn’t break 1.2105 (‘strong resistance’ level was at 1.2140 yesterday), a break of 1.2000 would not be surprising and would open the way for EUR / USD to move lower to 1.1965 “.
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