FXStreet (Bali) - While in the short term the USD index may be due for a pause, the mid term backdrop continues to improve, according to Niall O'Connor, FX Strategist at JPMorgan.
"The price action over the past week has affirmed this view given the break of several important resistance levels despite the steady decline in US rates."
"While the extent of the rally over the past few weeks has left short term momentum studies in an overbought framework suggesting some room for a pause, corrective retracements are viewed as buying opportunities.
"Again, the May lows effectively held a number of critical support levels including the 1.39- 1.40 area for EUR/USD, the 1.70 zone and highs from 2009 for GBP/USD, as well as the medium term range lows for the DXY near 79/78."
"As important, the price action maintains an impulsive and trending bias consistent with the view for additional upside beyond any short term retracement that may develop."
"As important, the monthly close confirmed a number of bullish reversal patterns for the USD in line with the developing upside bias. In this regard, the USD sees bullish reversal months against EUR, GBP, NZD, CHF and NOK."