USD/CNH risks extra pullbacks – UOB

FX Strategists at UOB Group still sees USD/CNH grinding lower in the next weeks.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘waning momentum coupled with oversold conditions suggest further sustained USD weakness is unlikely’ and we expected USD to ‘trade within a 6.5450/ 6.5690 range’. However, USD briefly dropped to a low of 6.5319 before rebounding strongly to end the day at 6.5629 (+0.23%). The recovery has room to extend higher but any advance is unlikely to challenge to resistance at 6.5900 (minor resistance is at 5.5830). Support is at 6.5540 followed by 6.5400.”

Next 1-3 weeks: “We highlighted yesterday that ‘the rapid improvement in shorter-term momentum suggests that a break of 6.5475 would not be surprising’. We added, ‘the next support is at 6.5200 followed by a major level at 6.4960’. USD subsequently edged below 6.5475 (low of 6.5458) before recovering. Oversold shorter-term conditions could lead to a 1 to 2 days of consolidation. However, as long as 6.6000 (‘strong resistance’ level was at 6.6250 yesterday) is intact, USD is expected to weaken further to 6.5200.”