Further Euro (EUR) weakness is not ruled out vs US Dollar (USD); oversold conditions suggest any decline could be limited to a test of 1.1185. In the longer run, c in EUR toward 1.1145, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
Buildup in downward momentum indicates further decline
24-HOUR VIEW: "When EUR was at 1.1310 in early Asian trade yesterday, we pointed out 'the bias for EUR is tilted to the downside.' However, we highlighted that 'as momentum is not strong, any decline is likely limited to a test of 1.1280.' EUR then dipped below 1.1280, rebounded, before plummeting to a low of 1.1210 in the NY session. While further weakness is not ruled out, oversold conditions suggest any decline could be limited to a test of 1.1185. The next support at 1.1145 is likely out of reach for now. Resistance is at 1.1245; a breach of 1.1270 would suggest the weakness has stabilised."
1-3 WEEKS VIEW: "In our latest narrative from Tuesday (06 May, spot at 1.1310), we highlighted that 'the current price movements are likely part of a consolidation phase, and we expect EUR to trade between 1.1225 and 1.1410 for now.' After trading sideways for a couple of days, EUR dropped below 1.1225 yesterday (low was 1.1210). The increase in downward momentum indicates further declines toward 1.1145. To maintain the buildup in momentum, EUR must remain below the ‘strong resistance’ level, currently at 1.1315."
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