US Dollar (USD) is likely to consolidate between 157.90 and 159.00. 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: "Subsequent to the strong surge in USD two days ago, we highlighted the following yesterday: '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'. USD subsequently rose to 159.45 before staging a sharp retreat to a low of 158.08. The immediate upward pressure has eased, and today, we expect USD to consolidate, most likely between 157.90 and 159.00."

1-3 WEEKS VIEW: "We turned positive on USD early this week. Tracking the subsequent strong rise, we indicated yesterday (14 Jan, spot at 159.15) that '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'. USD then rose to a high of 159.45 and pulled back sharply. Conditions remain deeply overbought, and upward momentum is starting to slow with the pullback. However, only a breach of 157.70 (no change in ‘strong support’ level from yesterday) would indicate that 160.00 is out of reach. Meanwhile, the overbought conditions suggest USD could consolidate for a couple of days."