USD/CNH: Downside pressure looks mitigated above 7.2000 – UOB

The likelihood of further downside in USD/CNH now appears to have lost some traction according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: We highlighted yesterday that “the soft underlying suggests USD could test 7.1240.” While USD broke below 7.1240 (low of 7.1170), it staged a sharp rebound to 7.1774. Today, USD could rebound further, but it is unlikely to threaten 7.2000 (minor resistance is at 7.1870). On the downside, if USD breaks below 7.1500 (minor support is at 7.1585), it would mean that USD is not rebounding further.  

Next 1-3 weeks: Two days ago (26 Jul, spot at 7.1465), we highlighted that “downward momentum has increased, and there is room for USD to weaken further.” We added, “it is worth noting that there are a couple of strong support levels at 7.1240 and 7.1000.” Yesterday, USD fell to a low of 7.1170 before rebounding strong. The buildup in downward momentum appears to be fading. From here, if USD breaks above 7.2000 (no change in ‘strong resistance’ level), it would suggest that 7.1000 is not coming into view this time around.