EUR/USD: Negative divergence suggests any advance may not reach 1.17200 – UOB Group

Momentum continues to suggest upside potential in Euro (EUR); negative divergence suggests any advance may not reach 1.1720. In the longer run, upward momentum is starting to build; the probability of EUR breaking above 1.1720 is increasing, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Momentum continues to suggest upside potential in Euro

24-HOUR VIEW: "EUR dropped to a low of 1.1573 on Wednesday and then rebounded. Yesterday, Thursday, we highlighted the following: 'The strong rebound has led to a slight increase in upward momentum, and EUR could rebound further today and test the resistance at 1.1675. Based on the current momentum, EUR is unlikely to break clearly above this level. The next resistance at 1.1720 is not expected to come under threat.' Our view of a further rebound was correct; however, we underestimated the strength of the momentum, as EUR soared to a high of 1.1697. While momentum continues to suggest upside potential in EUR, with negative divergence forming, any further advance may not reach the major resistance at 1.1720. Note that there is another resistance level at 1.1700. To keep the momentum going, EUR must hold above 1.1645, with minor support at 1.1660."

1-3 WEEKS VIEW: "We have expected EUR to trade in a range since early this week (as annotated in the chart below). Yesterday (28 Aug, spot at 1.1640), we indicated that 'we continue to expect range-trading but now expect a narrower range of 1.1580/1.1720.' EUR subsequently rose to a high of 1.1697 and closed on a firm note at 1.1682, up by 0.39%. Short-term upward momentum is starting to build, and the probability of EUR breaking above 1.1720 is increasing, and it would continue to increase in the coming days as long as 1.1620 (‘strong support’ level) is not breached. Looking ahead, if EUR breaks clearly above 1.1720, the probability of a break above 1.1745 will increase quickly."