In the opinion of the UOB Group’s currency strategists, the upward momentum in EUR/USD could lose traction below the 1.1390 level.
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24 hour view: “Last Friday, we noted that ‘upside momentum has ebbed somewhat and this, coupled with overbought conditions, suggests that EUR/USD is unlikely to strengthen much further’ and we expected EUR ‘to trade between 1.1435 and 1.1485″. EUR/USD subsequently rose to 1.1482 before falling sharply to close at 1.1414 (-0.34%).The sharp and rapid decline appears to be running ahead of itself and the risk of a sustained decline from not high here. Overall EUR/USD is more likely to trade sideways at these lower levels and is expected to be between 1.1390 and 1.1445.”
Next 1-3 weeks: “We expect EUR/USD to strengthen since last Wednesday (Jan 12, EUR/USD at 1.1370). In our latest narrative on Friday (Jan 14, EUR/USD at 1.1455), we believe that ‘more short-term could lead to a couple of days of consolidation first.” However, instead of consolidating, EUR/USD pulled back sharply and fell to a low of 1.1397 during the New York session. Upside momentum is starting to wane and a break of 1.1390 (no change from Friday’s “strong support” level) would indicate that 1.1515 is out of reach this time In order to rejuvenate flag momentum EUR/USD needs to move and hold for above 1.1445 within 1-2 days or a break of 1.1390 would not be surprising.”
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