EUR/USD: More downside if 21DMA breaks - OCBC

Euro (EUR) fell last week, in line with our caution for some 'speed bumps' in the interim. EUR was last at 1.1686 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risks remain skewed to the downside

"Trump's announcement of 30% tariff on all imports from EU over the weekend dampened European futures and EUR this morning. But the impact appears somewhat muted. This could be partially mitigated by France announcing plans to increase (from EUR32bn to EUR64bn) and expedite defence spending - double the military budget by 2027 (3 years earlier than initially planned) in response to geopolitical situation."

"PM Bayrou will provide more details on Tuesday. On tariffs, Ursula, president of the European commission said that EU remains 'ready to continue working towards an agreement' by the 1 August deadline. EU's countermeasures (worth about $24.5bn of imports from US) will be delayed until early August and leaders have also prepared a second list of countermeasures that is 'by now agreed to'."

"Bearish momentum on daily chart intact while RSI fell. Risks remain skewed to the downside for now. Next support at 1.1660 levels (21 DMA), 1.1620. If these levels break, then more downside may play out. Next big support at 1.1470 levels (50 DMA). Resistance at 1.1710, 1.1830 levels. Overall, tariff concerns and comments from ECB officials (on pace of EUR gains) may slow EUR's appreciation but overall, the constructive outlook remains intact."