EUR/USD: Likely to consolidate in a range of 1.1580/1.1650 - UOB Group

Sharp drop appears overdone; instead of weakening further, Euro (EUR) is more likely to consolidate in a range of 1.1580/1.1650 against US Dollar (USD). In the longer run, price action continues to suggest downside risk in EUR; the next level to monitor is 1.1550, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Price action continues to suggest downside risk in EUR

24-HOUR VIEW: "We stated on Monday that 'the risk of EUR is on the downside.' Yesterday (Tuesday), we pointed out that 'while the risk for EUR remains on the downside, the lacklustre momentum continues to suggest that 1.1625 is likely out of reach.' We also pointed out that 'resistance levels are at 1.1685 and 1.1705.' The subsequent price action did not quite turn out as we expected. EUR edged to a high of 1.1692 and then in a sudden move during the NY session, plunged to a low of 1.1590. The sharp drop appears overdone, and EUR is unlikely to weaken much further. Today, EUR is more likely to consolidate in a range of 1.1580/1.1650."

1-3 WEEKS VIEW: "We revised our EUR view to negative last Tuesday (08 Jul), when it was at 1.1745. At that time, we indicated that 'the current pullback could extend to 1.1660.' As we followed the subsequent price movements, we indicated in the early Asian session yesterday (15 Jul, spot at 1.1665), that 'the risk of EUR declining to 1.1625 is increasing.' We added, 'The downside risk will increase in the coming days as long as the 'strong resistance' at 1.1735 is not breached.' Although our assessment proved timely, we did not anticipate EUR to plunge to a low of 1.1590 in the NY session. The price action continues to suggest downside risk in EUR, and the next level to monitor is 1.1550. On the upside, the 'strong resistance' is now at 1.1705 instead of 1.1735."