24-hour view: The spike in volatility in USD came as a surprise. After soaring to a high of 141.31 in NY trade, USD reversed and nose-dived to a low of 138.76. The sharp decline appears to be overdone, but there is a chance for USD to test the critical support at 138.50. At this stage, it is unclear if USD can maintain a foothold below this level. Resistance is at 140.00, followed by 140.60. 

Next 1-3 weeks: Yesterday (27 Jul, spot at 140.40), we noted that the recent upward pressure had eased. We expected USD to consolidate and trade in a range of 138.50/141.95. In NY trade, USD rose to 141.31 before selling off sharply to 138.76. Momentum is beginning to build again, but USD must break clearly below the critical support at 138.50 before further weakness is likely. The likelihood of USD breaking clearly below 138.50 will remain intact as long as it stays below 141.30 in the next couple of days. Looking ahead, the next level to watch below 138.50 is Jul’s low near 137.25.