Euro: Downside scope seen limited against US Dollar – UOB

UOB’s Quek Ser Leang and Lee Sue Ann highlight that EUR/USD extended its recent slide to 1.1358, leaving conditions deeply oversold. While the Euro (EUR) could weaken further, they see downside as relatively limited, with strong supports at 1.1355 and 1.1325 and resistance at 1.1400–1.1430, where a break higher would signal stabilising Euro weakness.

Euro oversold near key supports

"24-HOUR VIEW: Two days ago, EUR plummeted to a low of 1.1367. Yesterday, EUR extended its decline to 1.1358 before closing marginally lower by 0.01% at 1.1379. Downward momentum is starting to slow. This, combined with deeply oversold conditions, suggests that EUR is unlikely to weaken much further. Today, EUR is more likely to range-trade between 1.1355 and 1.1400."

"1-3 WEEKS VIEW: In our last update from Wednesday (23 Sep, spot at 1.1450), we highlighted that “there is a chance for EUR to test 1.1400, but the odds for a sustained decline below this level are not high.” However, the breach of 1.1400 triggered a sharp decline that reached a low of 1.1358 yesterday. While EUR could weaken further, the deeply oversold conditions suggest that the scope for additional downside may be relatively limited. Furthermore, the decline in EUR that started two weeks ago has been substantial. It is also worth noting that there are two strong support levels, at 1.1355 and 1.1325. On the upside, a breach of 1.1430 (‘strong resistance’ level previously at 1.1490) would indicate that the weakness in EUR is stabilising. "