24-hour view: We did not anticipate the sharp drop that sent EUR to a low of 1.1058 (we were expecting EUR to trade sideways). While the sharp and swift drop appears to be a tad overdone, the weakness in EUR has not stabilised. There is room for USD to weaken further, even though the major support at 1.1010 is highly unlikely to come under threat today. Minor resistance is at 1.1090; if EUR breaks above 1.1110, it would mean that the weakness has stabilised.  

Next 1-3 weeks: Last Friday (21 Jul, spot at 1.1135), we highlighted that the recent EUR strength has ended. We held the view that “the pullback in EUR could extend, but any decline is expected to face solid support at 1.1010.” Yesterday, EUR pulled back further to 1.1058. The price movements reinforce our current view. Overall, only a breach of 1.1165 (‘strong resistance’ previously at 1.1200) would indicate that the downside risk has faded.