Euro: Rebound capped by nearby resistance against US Dollar – UOB

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight that EUR/USD has bounced strongly from 1.1573 after an excessive selloff, but momentum remains subdued. Intraday, the Euro (EUR) is expected to hold within 1.1595–1.1640. On a 1–3 week horizon, downside risks persist toward 1.1550, though oversold conditions suggest this major support may not be tested immediately. Longer-term targets remain at 1.1800 and 1.1850.

Euro recovery faces limited upside

"24-HOUR VIEW: EUR plummeted to a low of 1.1577 last Friday. When EUR was at 1.1585 yesterday, we highlighted that “the sharp decline appears excessive, but with no signs of stabilisation yet, EUR could decline further.” We pointed out that “the major support at 1.1550 is likely out of reach,” and we noted that “there is another support level at 1.1570.” However, instead of declining further, EUR rebounded strongly from 1.1573 to 1.1620. While EUR could continue to rebound today, given that there has been no clear increase in momentum, EUR should remain within a 1.1595/1.1640 range."

"1-3 WEEKS VIEW: Last Friday (28 Aug, spot at 1.1650), we indicated that EUR “appears to have entered a range-trading phase between 1.1600 and 1.1685.” After EUR subsequently fell below 1.1600, we highlighted yesterday (31 Aug, spot at 1.1585) that “the rapid increase in downward momentum suggests EUR could decline further.” We also highlighted that “oversold short-term conditions suggest the major support at 1.1550 may not come into view so soon.” While downward momentum has slowed somewhat with the subsequent strong rebound, only a breach of 1.1650 (no change in ‘strong resistance’ level) would indicate that 1.1550 is not coming into view."