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FX Strategists at UOB Group have shifted their outlook on the pair to neutral from bullish, expecting it to move into a consolidative phase.

Key Quotes

24-hour view: “The break of the strong 113.50 support and the subsequent sharp and rapid drop to an overnight low of 112.81 was clearly not expected. The sudden drop appears to be running ahead of itself but there is scope for a dip below the 112.81 low before the current weakness in USD should stabilize (the next support at 112.50 is unlikely to be challenged). Resistance is at 113.30 followed 113.55″.

Next 1-3 weeks: “USD broke the 113.50 ‘stop-loss’ for our bullish view and dropped sharply to a low of 112.81 yesterday. The price action suggests that the ‘up-leg’ from the early September low of 110.37 has ended at 114.54 last week and our target at 114.75 was not met. Note that we turned ‘positive’ on USD on 12 Sep (spot at 111.60) and shifted to ‘bullish’ last Tuesday (02 Oct, spot at 113.95). The current movement is viewed as the early stages of a correction phase and USD is expected to trade with a negative bias from here. However, it is premature to expect the start of a major bearish reversal and at this stage, we view any weakness as part of a 112.50/114.00 range. Looking further ahead, there is risk of deeper pull-back to 112.00 but the odds for such a move are not high for now”.