United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann maintain a cautious stance on EUR/USD after a dip to 1.1582 was followed by a strong rebound to 1.1644. While they still highlight 1.1570 as the key downside focus, they stress that slowing bearish momentum and positive divergence mean losses could be limited, with consolidation expected between 1.1600 and 1.1650 near term.

Euro consolidates as bearish momentum fades

“24-HOUR VIEW: EUR fell to a low of 1.1591 on Tuesday. When EUR was at 1.1610 in the early Asian trade yesterday, we indicated that EUR “could dip below 1.1590 and potentially test 1.1570 before the risk of a rebound increases.” We indicated that “resistance is at 1.1630, followed by 1.1645.” EUR subsequently dipped to a low of 1.1582 and then staged a surprisingly strong rebound during the NY session (high was 1.1644). Upward momentum is building, albeit not significantly. Today, instead of continuing to rise, EUR is more likely to consolidate between 1.1600 and 1.1650”

“1-3 WEEKS VIEW: We turned negative on EUR one week ago. After EUR dropped below 1.1600, we stated yesterday (20 May, spot at 1.1610) that “the focus is now at 1.1570.” We added, “while further declines below 1.1570 are not ruled out, the tentative slowing in short-term momentum, alongside early signs of positive divergence, suggests that the downside could be relatively limited.” We did not quite expect EUR to rebound strongly to 1.1644. Downward momentum has slowed further, and a breach of 1.1665 (no change in ‘strong resistance’ level) would indicate that 1.1570 is out of reach.”

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