Further decline in EUR/USD is likely on a sustained breach of the 1.0655 level, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “Our view for EUR to trade within a range of 1.0695/1.0775 was incorrect as it dropped to 1.0659 before rebounding to close at 1.0689 (0.43%). While the rebound amid oversold conditions has reduced the likelihood of further declines, EUR may test the 1.0655 support level before a more sustained recovery is likely. The major support at 1.0615 is unlikely to come under threat. Resistance is at 1.0715, a breach of 1.0735 would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “We highlighted yesterday (15 Feb, spot at 1.0735) that the recent EUR weakness has ended and EUR has moved into a consolidation phase and is likely to trade between 1.0655 and 1.0815. We did not anticipate the rapid manner in which EUR moved towards the bottom of the expected range (EUR dropped to 1.0659 in NY trade). Downward momentum is building again but EUR has to break and stay below 1.0655 before a sustained decline is likely. The chance of a sustained decline will increase as long as EUR does not move above 1.0760 (‘strong resistance’ level) within the next couple of days. Looking ahead, the next support below 1.0655 is a major level at 1.0615.”