There is a chance for Euro (EUR) to continue to decline, but the major support at 1.1610 is likely out of reach for now. In the longer run, rapid improvement in downward momentum is likely to continue to weigh on EUR; the risk of a break below 1.1610 has increased, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Improvement in downward momentum is likely to continue to weigh on EUR

24-HOUR VIEW: "Following the sharp decline in EUR on Wednesday that reached a low of 1.1727, we highlighted the following yesterday, Thursday: 'Conditions are deeply oversold, but the sharp decline has scope to break below 1.1715. Given the oversold conditions, EUR might not be able to maintain a foothold below this level, and the next major support at 1.1670 is also unlikely to come into view. On the upside, resistance levels are at 1.1755 and 1.1775.' EUR subsequently edged up to 1.1753, but in a sudden move in the early NY session, it staged a sharp selloff that reached a low of 1.1645. While the decline is deeply oversold, there is no sign of stabilisation just yet. Today, as long as EUR holds below 1.1715 (minor resistance is at 1.1685), there is a chance for EUR to continue to decline. That said, the major support at 1.1610 is likely out of reach for now."

1-3 WEEKS VIEW: "After expecting EUR to trade in a range for several days, we stated yesterday (25 Sep, spot at 1.1745) that 'downward momentum is starting to build, and if EUR breaks and holds below 1.1715, it is likely to trigger a drop toward the next major support at 1.1670.' We also indicated that 'to maintain the build-up in momentum, EUR must not break above 1.1795 (‘strong resistance’ level).' While our revision of view was timely, we did not expect EUR to break below 1.1715 so soon, as it plummeted to a low of 1.1645. The rapid improvement in downward momentum is likely to continue to weigh on EUR, and the risk of it breaking the major support at 1.1610 has increased considerably. Looking ahead, if EUR were to break below 1.1610, it would suggest that the mid-month high, near 1.1915, could be a nearterm top. On the upside, the ‘strong resistance’ is now at 1.1760 instead of 1.1795."