EUR/USD seen grinding lower to 1.2200 – UOB

The pair remains neutral for the time being and is expected to slip back to the 1.2200 region in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that “further sustained up-move is not expected” but were of the view that a “retest of the Monday’s high near 1.2360 would not be surprising”. EUR touched a high of 1.2354 before staging a surprisingly swift and rapid decline that moved below the strong 1.2240 support (overnight low of 1.2237). The sharp swing lower appears incomplete but oversold conditions suggest that any further decline would likely be at a slower pace and the major 1.2200 level is expected to offer very solid support (there is another major support near 1.2155). Only a move back above 1.2300 would indicate that the current weakness has stabilized (minor resistance is at 1.2275)”.

Next 1-3 weeks: “While we highlighted yesterday that we “continue to see chance for EUR to move lower and test the strong support at 1.2200”, the pace of the sharp decline yesterday that managed to edge below the 1.2240 support came as a surprise (overnight low of 1.2237). The strong down-move reinforces our view and we continue to expect a move towards 1.2200. At this stage, the prospect for a sustained move below 1.2200 is not that high and even if there is a break of this level, further strong support can be expected at the month-to-date low near 1.2155. That said, we continue to expect EUR to stay under pressure unless it can move back above 1.2385 (key resistance level unchanged). On a shorter-term note, 1.2355 is already a rather strong level”.