In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, further weakness could drag EUR/USD back to the 1.0700 region in the near term.

Key Quotes

24-hour view: “Yesterday, we highlighted that EUR could test the major support at 1.0800 before stabilizing. We indicated, ‘The next support at 1.0750 is unlikely to come under threat’. Our view for a lower EUR was correct even though we did not quite expect it to drop so sharply (and quickly) towards 1.0750 (low has been 1.0761). While clearly oversold, the EUR weakness has not stabilized. Today, EUR could break below 1.0750 but is unlikely to be able to reach the next major support at 1.0700. Resistance is at 1.0800; a break of 1.0820 would indicate the weakness in EUR has stabilized.”

Next 1-3 weeks: “We have held a negative EUR view since the middle of last week. As EUR declines, in our latest narrative from yesterday (18 May, spot at 1.0835), we indicated that ‘the risk for EUR remains on the downside’ and ‘it has to break clearly below 1.0800 before further decline to 1.0750 is likely’. Our view was not wrong even though we didn’t quite expect it to approach 1.0750 so quickly (NY low of 1.0761). The current strong downward momentum will likely ‘override’ the severely oversold conditions. To look at it another way, a break below 1.0750 will not be surprising and will shift the focus to 1.0700. On the upside, a breach of 1.0860 (‘strong resistance’ level was at 1.0900 yesterday) indicates that the weakness in EUR has stabilized.”