FX Strategists at UOB Group remain neutral on spot and expect a test of the 1.1790 area in the next weeks.
24-hour view: “We were of the view last Friday that the “rally is running ahead of itself” but added there is scope for EUR to “test 1.1735 first before it should settle down”. However, EUR only touched a high of 1.1721 before dropping in a surprisingly sharp and rapid manner (after news of Trump may impose tariff on Chinese goods). While the drop appears to be running too fast, too soon, there is no sign of stabilization just yet and EUR could extend lower and test the 1.1605 support. A dip below this level would not be surprising but the prospect for further weakness to the next support at 1.1575 is not high. On the upside, 1.1690 is expected to be strong enough to cap any intraday bounce (minor resistance is at 1.1665)”.
Next 1-3 weeks: “We indicated last Friday that the probability for a higher EUR has increased but added “only successive higher daily closings over the next few days would improve the odds for a move to 1.1790”. EUR subsequently touched a 1-1/2 high month of 1.1721 but slumped on the news that Trump is ready to impose tariff of Chinese goods (NY close of 1.1616, -0.51%). So far, the drop from the high is still holding above the 1.1605 ‘key support’ but as highlighted last Friday, a break of this level is enough “to indicate that the current nascent build-up in momentum has fizzled out”. From here, we would hold on to the view that that there is a chance for stronger recovery to 1.1790 but EUR has to move and stay above 1.1690 within these 1 to 2 days or this is unlikely to happen”.