Dwindling bets for a drop to 1.0480 – UOB

UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia note further weakness in EUR/USD seems to have lost some momentum.

Key Quotes

24-hour view: Yesterday, we held the view that “the oversold EUR has room to drop further to 1.0470 before stabilisation is likely.” However, EUR did not drop further. Instead, it rebounded strongly from a low of 1.0489 to 1.0578. The rebound appears to be running ahead of itself, and EUR is unlikely to advance much further. Today, EUR is more likely to trade in a range, probably between 1.0525 and 1.0585. 

Next 1-3 weeks: EUR rebounded strongly yesterday and closed higher by 0.56% (NY close of 1.0559). While our ‘strong resistance’ level of 1.0585 has not been breached yet, downward momentum has waned considerably, and the likelihood of EUR breaking below the year’s low near 1.0480 has diminished considerably as well. To put it another way, the EUR decline that started earlier this week could have found a bottom at 1.0486 (low on Wednesday).