Strong momentum indicates further US Dollar (USD) strength; the significant resistance at 160.00 is likely out of reach for now. In the longer run, strong USD rally has scope to extend, potentially breaking above 160.00, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Strong USD rally has scope to extend

24-HOUR VIEW: "While we indicated yesterday that 'there is scope for USD to rise further', we were of the view that 'any advance is likely part of a 157.60/158.40 range' We stated that USD 'is unlikely to break clearly above 158.40'. We were correct on the first count, but not the second. USD broke above 158.40 and surged, reaching a high of 159.19. Strong momentum indicates further USD strength, but the deeply overbought conditions suggest a slower pace of advance, and the significant resistance at 160.00 is likely out of reach for now. Note that there is a minor resistance at 159.60. On the downside, support levels are at 158.80 and 158.50."

1-3 WEEKS VIEW: "We turned positive on USD two days ago (12 Jan, spot at 158.00), pointing out that 'with rapidly increasing upward momentum, USD is likely to continue to rise'. We also pointed out that 'the level to watch is last year’s high, near 158.90'. Our view was validated as USD rose to a high of 159.19 yesterday. Despite the deeply overbought short-term conditions, the strong USD rally has scope to extend, potentially breaking above the round-number resistance of 160.00. Overall, only a breach of 157.70 (‘strong support’ level previously at 157.00) would indicate that the current strong upward pressure has eased."