Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group suggest EUR/USD still risks further downside in the near term.

Key Quotes

24-hour view: After EUR dropped to 1.0841 last Friday and then rebounded, we indicated yesterday that “the sharp rebound from the low in severely oversold conditions suggest EUR is unlikely to weaken further.” We expected EUR to consolidate and trade in a range of 1.0870/1.0940. Our view for EUR to consolidate was not wrong, even though it traded in a much narrower range than expected (1.0886/1.0920). The 34 pips range is the smallest 1-day range this year. Momentum indicators are neutral and today, EUR could continue to consolidate, likely between 1.0890 and 1.0940. 

Next 1-3 weeks: There is not much to add to our update from yesterday (26 Jun, spot at 1.0900). As highlighted, the recent 2-week EUR strength has ended. The sharp drop from last Friday suggests EUR is likely to trade with a downward bias. However, 1.0840 is a solid support level and might not be easy to break. It is worth noting that there is another solid support near 1.0805. On the upside, a breach of 1.0970 (no change in ‘strong resistance’ level) would indicate the downward bias has faded.