EUR/USD still faces downside risks – UOB
FX Strategists at UOB Group still favour further losses in EUR/USD, although a breach of 1.1065 still appears unlikely.
24-hour view: “EUR continued to fall across Fri and as expected the major 1.1065 support was “out of reach” as 1.1085 was already quite a strong support (low of 1.1083 on Fri). We continue to expect both levels to hold today although risk is still to the downside. A bounce to 1.1135 may be on the cards today but is unlikely extend any further than 1.1150.”
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.”