UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang note EUR/USD now faces tough support levels at 1.0840 ahead of 1.805 in the near term.

Key Quotes

24-hour view: The sudden lurch lower that sent EUR tumbling to 1.0841 came as a surprise (we were expecting EUR to trade in a range). The sharp rebound from the low in severely oversold conditions suggest EUR is unlikely to weaken further. Today, EUR is more likely to consolidate and trade in a range of 1.0870/1.0940. 

Next 1-3 weeks: We have held a positive EUR view since early in the month. After EUR rose to 1.1011 and retreated, we highlighted last Friday (23 Jun, spot at 1.0955) that “the current EUR strength could not afford to pause, or the risk of a reversal will increase rapidly.” However, we did not anticipate the sharp selloff as EUR plummeted to a low of 1.0841. The breach of our ‘strong support’ level at 1.0900 indicates that the 2-week EUR strength has ended. While the sharp drop suggests there is room for EUR to weaken further, 1.0840 is a solid support level and might not be easy to break. It is worth noting that there is another solid support near 1.0805. Overall, we expect EUR to trade with a downward bias as long as it stays below 1.0970 (‘strong resistance’ level) in the next few days