United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann highlight growing downside momentum in EUR/USD after a sharp drop to 1.1591, though they see limited scope for a sustained break below 1.1585 in the very near term. Over the coming weeks, a daily close under 1.1585 would raise the risk of a move toward 1.1565, while resistance is seen around 1.1645.

Key support at 1.1585 in focus

“24-HOUR VIEW: Following Wednesday’s price action, we indicated yesterday that “there has been no shift in either downward or upward momentum,” and we expected EUR “to trade in a range between 1.1610 and 1.1650.” However, EUR staged a sharp decline during the NY session, dropping to a low of 1.1591 before recovering to close at 1.1610 (-0.19%). Downward momentum is increasing, albeit not significantly. Today, as long as EUR holds below 1.1630 (minor resistance is at 1.1620), it could test the major support at 1.1585. Based on the prevailing momentum, a continued decline below this level appears unlikely.”

“1-3 WEEKS VIEW: We have been expecting EUR to trade with an upside bias since late last week. On Monday (07 Sep, spot at 1.1625), we highlighted that “the upside bias remains intact, but EUR should stay within a narrower range of 1.1585/1.1670.” Yesterday, EUR fell to a low of 1.1591. Downward momentum is starting to build, but it is insufficient to indicate a sustained decline. However, if EUR were to close below 1.1585, it would increase the odds of a break below the next major support at 1.1565. On the upside, a breach of 1.1645 (‘strong resistance’ level) would indicate that EUR is likely to continue to trade in a range.”