EUR/USD: the euro breaks through its annual low; next support level at 1.1070 (UOB)

UOB analysis of the EUR/USD pair:

Intraday analysis

UOB expected the EUR/USD to "retest the 1.1190 level", but not only did it break through that support, but it also broke through the year's low at 1.1174 (daily low at 1.1139). The impulsive manner of the drop suggests that a move below the daily low would not be surprising, but oversold conditions could limit the entire decline to 1.1110. On the upside, only a move above 1.1210 would indicate that the current "weakness" has stabilised (the 1.1190 level is already a fairly strong resistance).

Short-term analysis

We took on a negative position on Wednesday and expected the EUR/USD to "remain on the defensive". However, we felt that "the gloomy momentum suggests that any weakness should be limited to the next support level at 1.1140". In this context, Wednesday's euro drop, which broke the 1.1174 low, was not exactly unexpected (the EUR hit 1.1139 at the close of the New York session). While the drop of -0.65% recorded on Wednesday was rather significant, there were several cases this year where the EUR failed to fall despite the sharp daily decline. Not only did it not fall, but the EUR subsequently rebounded strongly. That being said, we don't expect a rebound at this time. The improvement in downward pressure suggests that the EUR may weaken further, although it's not clear at this point whether the next major support level at 1.1070 would come into play. On the upside, "key resistance" rose to 1.1240 from 1.1285 on Wednesday. The EUR should remain under pressure until it can break the "key resistance".