USD: further decline remains in the pipeline – UOB

Strategists at UOB Group assessed the prospects for the greenback, expecting further downside along the road.

Key Quotes

“USD Index broke below the key 91.00 support two weeks ago and since then, the pace of the decline has been frenetic (month-to-date loss of -3.42% and the month is not over yet). From a technical analysis perspective, the sharp and rapid drop could be attributed to the lack of significant support levels, both on short and long-term chart”.

“After the break of 91.00, the next support is at 88.25, which is about another 1% lower from the current level of 89.10. 88.25 is the 50% retracement of the rally from 72.70 (May 2011) to 103.82 (Jan 2017). This is not a major support and a break of this level would not be surprising and could lead to further rapid decline towards the rising weekly trend-line (currently residing at 86.60). This major trend-line is a significant level and is expected to offer solid support. However, a break of such key levels would normally lead to further sharp and rapid moves (the next support is further down at 84.60, the high is 2013 that is also close to the 61.8% retracement of the rally mentioned above)”.

“Overall, it is too early to expect USD to make a bottom as the impulsive characteristic of the decline clearly suggests further weakness is in the pipeline. On the upside, the ‘break-down’ level of 91.00 is acting as a very strong resistance now but USD has to reclaim 92.70 in order to indicate that a low is in place”.