EUR/USD keeps the bearish note intact so far – UOB

According to FX Strategists at UOB Group, EUR/USD still faces downside risks although strong support emerges at 1.1065.

Key Quotes

24-hour view: “We highlighted the downside risk in EUR yesterday and were of the view EUR ‘could test the strong 1.1110 support’. We indicated that ‘the prospect for a sustained decline below this level is not high’. EUR subsequently dropped to 1.1100 before settling on a weak note at 1.1103 (-0.43%). While the rapid decline has moved into oversold territory, the weakness is not showing sign of stabilization just yet. In other words, EUR could weaken further but oversold conditions suggest the major 1.1065 support is likely out of reach (1.1085 is already quite a strong support). On the upside, EUR has to move above 1.1145 in order to indicate that the current weakness has stabilized.”

Next 1-3 weeks: “We highlighted yesterday (08 Jan, spot at 1.1155) ‘downward momentum is beginning to pick up” and added “the prospect for a clear break of 1.1110 has increased’. EUR broke the 1.1110 support and touched an overnight low of 1.1100 before ending the day on a weak note at 1.1103 (the -0.43% decline is the biggest 1-day loss in 2 months). Downward momentum has improved further and the risk for EUR is still on the downside. However, the mid-Dec low near 1.1065 is a major support and at this stage, the prospect for a sustained decline below this level is not high. Overall, EUR is expected to remain on the back foot unless it can move above 1.1175 (‘key resistance’ level was at 1.1195 yesterday). Looking ahead, even if EUR were to break below 1.1065, any further weakness is expected to encounter solid support at 1.1030 followed by 1.1000. In other words, we do not consider the current weakness in EUR as part of a major downtrend.”