EUR/USD: A breakdown of 1.0650 appears unlikely.

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang note there is still scope for EUR/USD to retreat further in the near term.

Key Quotes

24-hour view: “After EUR dropped to 1.0700 last Friday and rebounded, we noted yesterday that ‘downward pressure has eased and EUR is unlikely to weaken much further’. We expected EUR to trade sideways between 1.0700 and 1.0750. However, EUR traded in a narrower range than expected (1.0704/1.0743). The underlying tone has weakened somewhat and EUR could edge below 1.0700 today but it is highly unlikely to threaten the major support at 1.0650 (there is a minor support is at 1.0680). On the upside, a breach of 1.0745 (minor resistance is at 1.0725) would indicate the current mild downward pressure has faded.”

Next 1-3 weeks: “Our most recent narrative from last Friday (26 May, spot at 1.0725) still stands. As highlighted, the selloff in EUR that started about 2-1/2 weeks ago appears to be overextended, both in terms of time and price. While EUR could still drop below the major support at 1.0700, it remains to be seen if it has enough momentum to break clearly below the next support at 1.0650. All in all, only a breach of 1.0775 (no change in ‘strong resistance’ level) would suggest that the weakness in EUR has stabilized.”

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