UOB strategists Quek Ser Leang and Lee Sue Ann maintain a negative stance on EUR/USD after the pair broke below 1.1600 and closed lower around 1.1604. They now focus on 1.1570 as the key downside level, with potential extension toward 1.1540, while noting that a break above 1.1665 would signal stabilising Euro weakness in the short term.

Euro downside bias toward key supports

"24-HOUR VIEW: EUR dropped to a low of 1.1607 on Monday and then rebounded. When EUR was at 1.1655 yesterday, we highlighted that “there is room for EUR to rebound further, but any advance is expected to face strong resistance at 1.1685.” Our assessments turned out to be incorrect, as EUR fell to a low of 1.1591, closing 0.44% lower at 1.1604. After the rebound, the subsequent decline, though relatively sharp, did not gather much momentum. That said, there is scope for EUR to dip below 1.1590 and potentially test 1.1570 before the risk of another rebound increases. Resistance is at 1.1630, followed by 1.1645."

"1-3 WEEKS VIEW: Tracking our negative EUR view since the middle of last week, we highlighted two days ago (18 May, spot at 1.1620) that “strong downward momentum continues to suggest downside risk for EUR.” We added, “a clear break below 1.1600 will shift the focus to 1.1570.” Yesterday, EUR broke below 1.1600 and reached a low of 1.1591. As stated, the focus is now at 1.1570. Overall, a breach of 1.1665 (‘strong resistance’ level previously at 1.1685) would indicate that the weakness in EUR is stabilising. Looking ahead, 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. The level to watch below 1.1570 is 1.1540."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)