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FX Strategists at UOB Group noted the pair remains in a downside corrective and could extend to the mid-111.00s in the short-term.

Key Quotes

24-hour view: “While we expected USD to ‘dip’ yesterday, the ease of which the strong 112.50 support was taken out and the subsequent sharp drop that hit an overnight low of 112.23 was clearly not anticipated. USD extended its decline after NY close and from here, a break of 112.00 would not be surprising. The next support is at 111.50 but this level is likely out of reach for now (minor support is at 111.80). On the upside, we expect 112.70 to be strong enough to cap any intraday USD strength (minor resistance is at 112.50)”.

Next 1-3 weeks: “When we shifted from a bullish to neutral stance on Tuesday (09 Oct, spot at 113.10), we held the view that USD has entered a correction phase. We expected USD to trade with a ‘negative bias’ within a 112.50/114.00 range and highlighted, “looking further ahead, there is risk of a deeper pullback to 112.00 but the odds for such a move are not high for now”. The large drop of -0.59% yesterday came as a surprise as USD dropped to a low of 112.23 before extending its decline after NY close (low of 112.06 at the time of writing). The rapid improvement in downward momentum suggests USD would remain under pressure in the coming days. At this stage, we still view the USD weakness as a ‘correction’ and not the start of a major bearish reversal. That said, there is scope for USD to weaken further to 111.50 in the coming days. On the upside, only a break above the ‘key resistance’ at 113.00 would indicate that the current weak phase in USD has stabilized”.