FX Strategists at UOB Group assessed the recent price action around the pair.
24-hour view: “We expected USD to “grind higher and test the strong 110.75 resistance” yesterday. USD managed to move above this strong resistance and touched a high of 110.85 before ending the day in NY on a solid note. While overbought, the up-move appears to have enough momentum to challenge the major 111.00 level. A break of this level would not be surprising but in view of the overbought condition, a sustained move above 111.25 seems unlikely (there is another major resistance at 111.50). On the downside, we expect 110.25 to be strong enough to hold any intraday pull-back (minor support is at 110.50)”.
Next 1-3 weeks: “While we detected the shift in pressure to the upside last Thursday (10 May, spot at 110.75), the extent and rapid pace of the rise in USD since then is not exactly expected. However, we did note on Wednesday (16 May, spot at 110.25) that “further USD strength to 111.00 is not ruled out” and now that we are approaching this level, there is no sign that USD is slowing down. From here, it looks increasing likely that USD is on the cusp on entering a bullish phase. Confirmation of a shift to bullish phase is upon a NY close above 111.00 and the immediate target would be at 112.00 (even though 111.50 may not be easy to crack). On the downside, only a break below 110.00 would indicate that the current upward pressure has eased. On a shorter-term note, 110.25 is already a strong support level”.