FX Strategists at UOB Group suggested there is still scope for further decline in EUR/USD in the short-term horizon.

Key Quotes

24-hour view: “While we expected EUR to ‘weaken further’ yesterday, we were of the view that ‘a sustained decline below 1.1210 is unlikely’. We did not anticipate the sharp sell-off that sliced through a couple of major supports with ease (low has been 1.1130). While there is room for the sell-off to extend, deeply oversold conditions suggest that a clear break of 1.1100 is unlikely. On the upside, a break of 1.1185 (minor resistance is at 1.1165) would indicate that the current weakness has stabilized.”

Next 1-3 weeks: “Yesterday (27 Jan, spot at 1.1240), we highlighted that downward momentum has improved further and EUR is likely to continue to head lower. We added, ‘a clear break of 1.1210 would increase the odds for EUR to head lower towards the 2021 low near 1.1185’. While our view for a weaker EUR was not wrong, the break of 1.1185 triggered an outsized plunge to 1.1130. The impulsive downward momentum is likely lead to further EUR weakness. The next support levels are 1.1100 followed by 1.1050. Overall, the weak phase in EUR that started one week ago (see annotations in the chart below) is intact as long as EUR does not move above 1.1225 (‘strong resistance level was at a much higher level of 1.1315 yesterday).”