United Overseas Bank’s Quek Ser Leang and Lee Sue Ann highlight a strong EUR/USD rebound to around 1.1200 after recent oversold weakness. In the near term, they see scope for the Euro to challenge resistance at 1.1220, while a sustained break would signal that the month-long downtrend has stabilised. However, they still flag deeply oversold conditions and acknowledge that further downside cannot be fully ruled out.

Euro recovery challenges 1.1220 barrier

“24-HOUR VIEW: EUR fell sharply to a low of 1.1151 two days ago. Yesterday, we stated that “further EUR weakness is not ruled out, but given the oversold conditions, any decline should stay within a 1.1145/1.1185 range.” We were incorrect, as EUR rebounded strongly to a high of 1.1204. The advance has gained some momentum, and today, the rebound could potentially break above the strong resistance at 1.1220. We do not expect the major resistance at 1.1270 to come into view. However, it remains to be seen whether it can maintain a foothold above this level. Support is at 1.1185, followed by 1.1170.”

“1-3 WEEKS VIEW: We highlighted yesterday that “the weakness in EUR that started more than a month ago has not quite stabilised, and EUR could decline gradually toward 1.1115.” We did not expect EUR to rebound strongly to a high of 1.1204. Downward momentum is fading rapidly with the strong rebound, and a break above 1.1220 (no change in ‘strong resistance’ level) would mean that the decline that started more than a month ago has stabilised.”