Scope for US Dollar (USD) to drop below 7.2600, but it might not be able to maintain a foothold below this level, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

A break below 7.2600 may lead to 7.2400

24-HOUR VIEW: “Yesterday, we indicated that USD could rise to 7.2990 before the risk of a pullback increases. However, USD plummeted from a high of 7.2909, reaching a low of 7.2611. While the sharp and swift drop appears to be running ahead of itself, there is scope for USD to drop below 7.2600. However, oversold conditions suggest it might not be able to maintain a foothold below this level. The next support at 7.2500 is unlikely to come into view. Should USD break above 7.2800 (minor resistance is at 7.2745), it would mean that it is not declining further.”

1-3 WEEKS VIEW: “Last Friday (12 Jul, spot at 7.2685), we indicated that USD ‘is likely to trade with a downward bias towards 7.2400, as long as it remains below 7.2910.’ After USD rose to 7.2924, we highlighted yesterday (17 Jul, spot at 7.2900) that ‘downward momentum has faded, but while upward momentum has increased slightly, it is not enough to suggest a sustained advance.’ We expected USD to trade in a 7.2600/7.3100 range. We did not anticipate USD to fell sharply to a low of 7.2611. Downward momentum is building again, but USD must break and stay below 7.2600 before a decline to 7.2400 can be expected. The chance of USD breaking clearly below 7.2600 will remain intact provided that 7.2900 is not breached.”