EUR/USD poised for extra pullbacks in the next weeks – UOB

The pair remains on the defensive and risks further retracements in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected a break of the major 1.1505/10 support last Friday, the subsequent ‘free-fall’ upon the breach of this level came as a surprise (low of 1.1383 last Friday). EUR extended its down-move upon opening this morning as it hit a fresh low of 1.1368 during Sydney hours. The decline is severely over-extended and while further EUR weakness still seems likely in the days ahead, we expect this pair to consolidate its loss and trade sideways to slightly lower for now. Expected range for today; 1.1350/1.1445”.

Next 1-3 weeks: “While we have the same view that EUR is expected to “retest the major 1.1500/10 support zone” since 03 Aug (spot at 1.1585), the ‘freefall’ upon the break of this major level last Friday (10 Aug) was not exactly expected. We highlighted on Friday that a clear break of this level “would indicate that a move to the next major support at 1.1365 has started”. EUR hit a low of 1.1368 early this morning during Sydney hours and in view of the impulsive break, there is clearly room for further EUR weakness in the coming days. That said, unless there is further development on the macro front, it is unlikely that EUR can maintain the current pace of decline. Overall, we are upgrading our ‘negative’ outlook to ‘bearish’ and set 1.1285 as the next ‘target’ (this level is followed by another strong support is at 1.1185). On the upside, the ‘stop-loss’ level is at 1.1500 even though ideally, EUR should not move back above 1.1445 within these 1 to 2 days”.