USD/CNH: Extra consolidation remains on the table – UOB
|Further side-lined trade looks the name of the game for USD/CNH for the time being, comment UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.
Key Quotes
24-hour view: Last Friday, USD dropped to a low of 7.2812 and then rebounded. Yesterday (Monday), we indicated that “the rebound has room to extend, but it is unlikely to break the strong resistance level at 7.3200.” The anticipated advance exceeded our expectations as USD broke above 7.3200 and reached 7.3229. Upward momentum has improved, albeit not much. USD could continue to advance, but today it is highly unlikely to reach the major resistance at 7.3600 (there is another resistance at 7.3400). On the downside, if USD breaks below 7.3070 (minor support is at 7.3150), it would indicate that USD is not advancing further.
Next 1-3 weeks: Our latest narrative was from last Friday (29 Sep, spot at 7.2975), wherein “if USD breaks clearly below 7.2800, it could trigger a rapid drop to 7.2600.” USD then dropped to 7.2812 and rebounded. Yesterday, USD broke above our ‘strong resistance’ level at 7.3200. The momentum buildup has faded. In other words, USD is not ready to break below 7.2800. From here, USD is likely to trade in a range, probably between 7.2800 and 7.3600.
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