24-hour view: The outsized selloff of 1.38% (NY close of 142.07) last Friday came as a surprise (we were expecting USD to trade in a range).  The rapid drop is severely oversold and USD is unlikely to weaken much further. Today, USD is more likely to consolidate and trade in a range of 142.00/143.30. 

Next 1-3 weeks: Last Thursday (06 Jul, spot at 144.50), we noted that “the USD strength is struggling to maintain its momentum, and the chance for extension to 145.50 appears low”. After USD fell below our ‘strong support’ level of 143.90, we indicated on Friday (07 Jul, spot at 143.90) that “the 3-week USD strength has ended” and we expected USD to trade in a range between 142.90 and 145.00. We did not anticipate the sharp pullback in USD that led to an outsized drop of 1.38% (NY close of 142.07). The 1.38% decline is the largest 1-day drop in about four months. While the price actions suggest USD could pullback further, it is worth noting that there is a solid support level at 141.60 and another at 140.95. All in all, only a breach of 144.00 (‘strong support’ level) would indicate that USD is pulling back further.