The UOB Group Currency Strategists expect the EUR / USD to decline in the coming weeks.
Key Comments:
24 hour view: “We expected the EUR / USD to weaken last Friday, but we are of the opinion that ‘any weakness is likely to be confined to a retest of the 1.2110 level.’ We note that ‘the next 1.2080 support is unlikely to be threatened.’ Subsequent EUR / USD weakness beat our expectation as it broke 1.2080 (1.2072 low) before closing weakly at 1.2078 (-0.64%). Bearish momentum is strong and EUR / USD is likely to weaken. That being said, oversold conditions suggest that the main support at 1.2010 is probably 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 had a negative view on the EUR / USD since the beginning of last week. We noted last Friday that ‘short term momentum is building again and there is still a chance that the EUR / USD will move towards solid support at 1.2080’. We add, ‘Unless there is a sudden surge in momentum, the prospect of a sustained decline below this level is not high.’ The subsequent sharp increase in momentum came as a surprise when EUR / USD broke at 1.2080 and fell to 1.2072. In view of the huge improvement in momentum, EUR / USD is likely to weaken. The next level to focus on is last September’s peak (resistance turned support) around 1.2010. Overall, the current negative phase could remain intact for a while longer unless EUR / USD moves above 1.2170 (‘strong resistance’ level was at 1.2220 last Friday). “
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