Euro: Downside risks versus US Dollar focus on 1.1570 – UOB

UOB’s Quek Ser Leang and Lee Sue Ann note that EUR/USD has dropped to a six-week low near 1.1620, with strong downward momentum keeping risks skewed lower. While intraday moves are seen within a 1.1600–1.1655 range due to oversold conditions, a clear break below 1.1600 would open the way toward 1.1570, with resistance capped around 1.1685.

Oversold Euro still vulnerable to losses

"24-HOUR VIEW: Last Thursday, EUR dropped sharply to a low of 1.1655. When EUR was at 1.1670 in the early Asian session on Friday, we indicated that “strong momentum could lead to EUR breaking below last month’s low near 1.1655.” We also highlighted that “the next support at 1.1630 is probably out of reach for now.” However, EUR fell more than expected to 1.1616. While EUR could continue to weaken, deeply oversold conditions suggest any decline is likely part of a lower range of 1.1600/1.1655. In other words, a continued decline below 1.1600 is unlikely."

"1-3 WEEKS VIEW: We turned negative on EUR last Thursday (14 May, spot at 1.1715). We indicated that EUR “could trade with a downside bias toward 1.1675.” After EUR dropped below 1.1675, we indicated on Friday (15 May, spot at 1.1670) that “given the rapid increase in momentum, we believe there is scope for EUR to drop to 1.1630, potentially testing the significant support at 1.1600.” EUR subsequently dropped to a low of 1.1616. While the decline is oversold, strong downward momentum continues to suggest downside risk for EUR. From here, a clear break below 1.1600 will shift the focus to 1.1570. We will maintain our negative EUR view as long as it holds below the ‘strong resistance’ at 1.1685 (level was at 1.1720 last Friday)."

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