EUR/USD weakness could extend to 1.0730 – UOB

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group note further downside pressure could drag EUR/USD to the 1.0730 region.

Key Quotes

24-hour view: Yesterday, we expected EUR to trade in a range of 1.0830/1.0895. Our expectation was incorrect. Instead of consolidating, EUR fell to 1.0803 before closing on a soft note at 1.0809 (-0.45%). Downward momentum has increased, but on the other hand, the weakness in EUR is oversold. Today, we see chance of EUR breaking the major support at 1.0790, but the next support at 1.0730 is likely out of reach. The downside risk is intact as long as EUR stays below 1.0860 (minor resistance is at 1.0830).

Next 1-3 weeks: We have expected EUR to weaken since the start of the week (see annotations in the chart below). In our update from yesterday (24 Aug, spot at 1.0865), we highlighted that EUR “could consolidate for 1-2 days before moving towards 1.0790.” We did not anticipate EUR dropping to 1.0803. Note that EUR extended its decline in early Asian trade today. The price actions suggest that a break of 1.0790 will not be surprising. The next level to focus on below 1.0790 is 1.0730. The EUR weakness is intact as long as it stays below 1.0890 (‘strong resistance’ level was at 1.0915 yesterday).