In light of the oongoing up move, the pair could visit 113.70, suggested FX Strategists at UOB Group.
24-hour view: “We expected USD to the “test the 112.60/65 resistance” yesterday and the clear break of this level and the subsequent strong advance that hit a 3-week high of 113.09 came as a surprise. The rapid rally is severely overbought and while further advance is not ruled out, the prospect for a sustained break of 113.50 is not high (next resistance is at 113.70). On the downside, we expect 112.60 to be strong enough to hold any intraday pullback (minor support is at 112.85)”.
Next 1-3 weeks: “While we indicated yesterday “the odds for further USD weakness have diminished”, the subsequent strong rally in USD that hit a 3-week high of 113.09 was clearly not expected (note that USD extended its gain after NY close). Short-term momentum is clearly strong but at this stage, it is unclear to us whether USD can maintain the current strength in the days ahead. From here, we see scope for USD to test the 113.70 resistance but the probability of a sustained move above this level is not high for now. All in, USD is expected to stay underpinned as long as the ‘key support’ at 112.60 is intact”.
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