24-hour view: The sharp selloff in EUR that sent it plunging to a low of 1.0705 came as a surprise (we were expecting it to trade sideways). What is not surprising is that the sharp and swift drop is oversold. However, there are no signs of stabilisation just yet. From here, as long as EUR stays below 1.0760 (minor resistance is at 1.0745), it could dip below 1.0700 first before the risk of a rebound increases. The next support at 1.0660 is unlikely to come under threat.

Next 1-3 weeks: Two days ago (04 Sep, spot at 1.0775), we noted “there is a tentative buildup of downward momentum”, and held the view that “this could cause EUR to edge lower to 1.0720.” We indicated that “looking ahead, EUR must break and stay below 1.0720 before a sustained decline can be expected.” Yesterday, EUR plunged to a low of 1.0705 before closing at 1.0720 (-0.69%). The marked increase in momentum suggests EUR is likely to continue to weaken. The level to watch is May’s low of 1.0635. The downside risk is intact as long as EUR stays below 1.0800 (‘strong resistance’ level previously at 1.0860).