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The pair’s near term outlook remains positive and still eyes a test of the 114.70 region in the next weeks, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Expectation for USD to extend its gain was wrong it staged a sharp reversal after touching a high of 114.54. The sharp and rapid drop that hit a low of 113.62 appears to be running ahead of itself and we do not expect further sharp decline from here. USD is more likely to consolidate and trade sideways, likely between 113.60 and 114.20″.

Next 1-3 weeks: “The bullish 114.70 ‘target’ that was first highlighted on Tuesday (02 Oct, spot at 113.95) remains elusive as USD staged a surprisingly sharp drop after touching a high of 114.54 during Asian hours yesterday. The rapid decline touched a low of 113.62 during NY hours, holding just above the ‘stop-loss’ for our bullish view at 113.50. The price action has clearly dented the recent strong upward momentum but confirmation of a short-term top is only upon a break of 113.50. That said, USD could not afford to hold below 114.70 for too long as a prolonged consolidation at these overbought levels would greatly increase the odds for a short-term top. All in, the price action over next few days should give us a clue on whether the current USD strength could extend further. Note that USD moved into a ‘positive’ phase more than 3 weeks ago, see update on 12 Sep (spot at 111.60) and we upgraded the outlook to bullish on Tuesday (02 Oct)”.