Euro: Rebound capped by resistance against US Dollar – UOB

United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann highlight that EUR/USD bounced on Tuesday as the US Dollar Index (DXY) slipped, but they still see the broader Euro (EUR) downtrend intact. Intraday, they expect further recovery to be limited within a defined range, while on a 1–3 week basis they stress that only a clear break above nearby resistance would signal that recent Euro weakness has finally stabilised.

Euro recovery faces key hurdle

"24-HOUR VIEW: On Monday, EUR dropped to 1.1160 and then recovered. When it was at 1.1220 yesterday, we indicated that “despite the relatively sharp drop, there has been no clear increase in downward momentum.” We held the view that EUR “is likely to trade in a range between 1.1180 and 1.1255.” Instead of trading in a range, EUR rebounded to 1.1276 and closed 0.33% higher at 1.1258. There is scope for the rebound to extend but with no clear increase in upward momentum, any advance should stay within a 1.1220/1.1285 range."

"1-3 WEEKS VIEW: Tracking our negative EUR [view] from the middle of last month, we highlighted yesterday (05 Oct, spot at 1.1220) that “downward momentum is showing early signs of slowing, but only a breach of 1.1285 (‘strong resistance’ level) would indicate that the decline is stabilising.” We added, “until then, there is a chance for EUR to test 1.1145 next.” EUR subsequently rebounded to 1.1276, and downward momentum has slowed further. That said, only a clear break above 1.1285 would indicate that the weakness in EUR has stabilised."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)