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Won rallies, but USD/KRW uptrend seen intact unless USD turns bearish
TD Securities points to 1493-1494 as a key USD/KRW level that could force trend followers to flip shorts, with intervention risks also highlighted.
TD Securities Macro Research says the South Korean won rally has attracted FX attention, but the broader US dollar uptrend against the won is still intact and is expected to persist until a new bearish USD cycle emerges.
The firm links KRW outperformance to a mix of factors including a resurgence of Middle East geopolitical risk that lifted crude oil prices, along with weaker equity prices for semiconductor stocks.
In USD/KRW, TD Securities flags 1493 to 1494 as an important technical area, estimating it is the level where trend followers would be pushed to reverse positioning. It adds that dip buyers could look to re-enter if spot holds above that range over the next week.
TD Securities also notes that sustained USD/KRW downside has typically only appeared during broader periods of a weaker USD in recent years, and it expects the broader dollar to stay resilient until Fed rate hikes are increasingly priced out by weaker US data.
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