EUR/USD: A deeper pullback should hold at 1.1030 – UOB
FX Strategists at UOB Group noted that further decline in EUR/USD is likely to meet solid contention in the 1.1030 region.
24-hour view: “We highlighted yesterday that downward pressure eased but ‘it is too early to expect a sustained recovery’. EUR subsequently traded between 1.1079 and 1.1118, relatively close to our expected sideway-trading range of 1.1075/1.1115. While the retreat from 1.1118 has weakened the underlying tone, any down-move in EUR is expected to encounter strong support at 1.1065. An intraday dip below this level is not ruled out but for today, a sustained decline is unlikely (the next support at 1.1030 is not expected to come into the picture). On the upside, only a move back above 1.1115 would indicate the current mild downward pressure has eased.”
Next 1-3 weeks: As highlighted, there is scope EUR to dip below the strong 1.1065 support but the current weakness Is not viewed as part of a trending down-move and the next support at 1.1030 is likely strong enough to hold any further decline. Taking a step back, we have noted on 03 Jan that EUR ‘is likely in the early stages of a corrective pullback’. From here, the pullback has room to extend lower but lackluster momentum suggests EUR could stabilize ahead of 1.1030. Only a clear break of 1.1030 would increase the risk of a more sustained decline. On the upside, a move above 1.1150 (no change in ‘strong resistance’ level) would suggest the current weakness has stabilized.”