EUR/USD risks a deeper pullback – UOB

FX Strategists at UOB Group noted EUR/USD faces prospects of further decline in the next weeks.

Key Quotes

24-hour view: “While the sharp overnight plunge in EUR appears to be running ahead of itself, the decline has not stabilized. In other words, EUR is likely to weaken further. In view of the deeply oversold conditions, the support at 1.1920 is unlikely to come into the picture (minor support at 1.1955). Resistance is at 1.2020 followed by 1.2050.”

Next 1-3 weeks: “On Monday (14 Jun, spot at 1.2110), we highlighted that improvement in downward momentum could lead to EUR to ‘trade with a downward bias towards 1.2050’. After EUR traded in a quiet manner for a couple of days, we noted yesterday (16 Jun) that ‘while momentum is beginning to wane, there is still chance for EUR to decline to 1.2050’. While our view for a weaker EUR was not wrong, we did not anticipate the outsized decline of -1.07% yesterday (the decline is the largest 1-day drop since March last year). Despite being oversold, EUR is likely to weaken further even though it is left to be seen if it can break the major long-term support at 1.1920. All in, the risk remains on the downside unless EUR can move above 1.2080 (‘strong resistance’ level was at 1.2180 yesterday).”