Euro: Recovery against US Dollar moves closer to resistance – UOB

A sharp EUR/USD recovery following an early New York sell-off has prompted United Overseas Bank strategists Quek Ser Leang and Lee Sue to shift from a negative outlook to a cautiously constructive stance. They now expect the Euro (EUR) to test higher resistance levels, although further gains depend on nearby support levels holding. Should those supports fail, the pair could return to range-bound trading rather than sustain its advance.

Euro rebounds towards 1.1220–1.1250

"24-HOUR VIEW: Following Wednesday’s price action, we highlighted yesterday that EUR “has likely entered a range-trading phase between 1.1120 and 1.1190.” The subsequent price movements did not unfold as expected. During the early NY session, EUR fell sharply to a low of 1.1103. The decline was, however, brief, as EUR rebounded strongly to close at 1.1178 (+0.23%). Strong momentum suggests there is scope for EUR to rise further toward 1.1220. Given the overbought conditions, EUR is unlikely to break clearly above this level. To keep the momentum going, EUR must hold above 1.1155, with minor support at 1.1170."

"1-3 WEEKS VIEW: We turned negative on EUR on Tuesday (27 Oct, spot at 1.1175). After EUR dropped to a low of 1.1111 and rebounded strongly, we highlighted the following yesterday (29 Oct, spot at 1.1160): “Downward momentum has slowed somewhat with the rebound, and EUR must break and close below 1.1110 before a sustained decline can be expected. The likelihood of EUR closing below 1.1110 will remain intact as long as 1.1190 (‘strong resistance’ level) is not breached.” EUR subsequently dropped briefly to 1.1103 before rebounding strongly to 1.1185. In the early Asian session today, EUR rose above our ‘strong resistance’ at 1.1190. Downward momentum has eased. There has been a tentative buildup in upward momentum, and EUR could rebound further to 1.1220. Looking ahead, if EUR closes above 1.1220, it could rise further to 1.1250. On the downside, a breach of 1.1130 would indicate that EUR is more likely to range-trade rather than heading to 1.1220."

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