Instead of continuing to weaken, the US Dollar (USD) is likely to trade in a 7.1100/7.1700 range. Further USD weakness is not ruled out, but the low near 7.0635 is solid support now, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

May try to test 7.1700 in mid term

24-HOUR VIEW: “While we expected USD to weaken yesterday, we indicated that ‘the support at 7.1300 is unlikely to come under threat.’ We obviously did not anticipate the wild price action, as USD plunged to 7.0636 and then snapped back to close at 7.1350 (-0.48%). The rebound in severely oversold conditions suggests instead of continuing to decline, USD is likely to trade in a 7.1100/7.1700 range today.”

1-3 WEEKS VIEW: “We have held a negative USD stance since late last month. Yesterday (05 Aug, spot at 7.1490), we indicated that ‘the recent price action continues to suggest further USD weakness, even though it is too early to determine if the long-term support near 7.0980 is within reach.’ USD subsequently not only broke below 7.0980, but also fell further to a low of 7.0636. While downward momentum has slowed somewhat with the strong rebound from the low, only a breach of 7.2000 (no change in ‘strong resistance’ level) would mean that the weakness has stabilised. Until then, further USD weakness is not ruled out, but the low near 7.0635 is solid support now.”