FX Strategists at UOB Group now shifted their short-term outlook on spot to bullish from neutral.
Key Quotes
24-hour view: “The sudden and outsized rally in USD yesterday that blast past the major 111.50 resistance took us by surprise. The rally is clearly over-extended but with no sign of weakness just yet, further advance to 112.40/45 is not ruled out. At this stage, a sustained above this level seems unlikely. Support is at 111.75 followed by the ‘break-out’ level of 111.50”.
Next 1-3 week: “While our recent expectation for “USD to stay supported” was correct, the manner of which it blast past the major 111.50 resistance yesterday came as a rather big surprise. This level is close to a major declining trend-line on the weekly chart that stretches back to Aug 2015 and the impulsive break of this solid resistance and the subsequent strong daily closing suggests that USD has moved into a bullish phase (note that USD has broken above the weekly Ichimoku cloud as well). The immediate ‘target’ is at 113.40. That said, in order to maintain the current ‘impulsive momentum’, USD could not afford to vacillate and has to continue to ‘power higher’ in the next few days. The confidence level for further USD strength would improve considerably if USD can close above 112.40/45. On the downside, the ‘stop-loss’ level is at 111.30 even though the ‘breakout” level of 111.50 is already a strong support”.
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