EUR/USD risks a drop to 1.1565 – UOB

In opinion of FX Strategists at UOB Group, EUR/USD could drift lower to the 1.1565 level in the next weeks.

Key Quotes

24-hour view: “The sharp sell-off that sent EUR plunging to 1.1588 came as a surprise (we were expecting a consolidation). The rapid drop appears to be overdone but is not showing sign of stabilization just yet. In other words, EUR could weaken further. In view of the deeply oversold conditions, any weakness is likely limited to a test of 1.1565. On the upside, a break of 1.1650 (minor resistance is at 1.1625) would indicate that the current weakness has stabilized.”

Next 1-3 weeks: “Yesterday (29 Sep, spot at 1.1685), we expected EUR ‘to trade with a downward bias’ and we were of the view that ‘the major support at 1.1630 may not come into the picture so soon’. While our view for a weaker EUR is correct, we did not anticipate the subsequent sharp and rapid drop as EUR easily cracked 1.1630 and plummeted to 1.1588. Downward momentum has improved considerably and EUR is likely to weaken further. The next support is at 1.1565 followed by rather major level at 1.1530. On the upside, a break of 1.1680 (‘strong resistance level was at 1.1745 yesterday) would indicate that the current downside risk has dissipated.”