Chinese Yuan: Weakness extends after breakout against US Dollar – UOB

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight a sharp USD/CNH spike to 6.8195, now seen consolidating between 6.8030 and 6.8185 on an intraday basis after an overdone rise. On a 1–3 week horizon, their positive Dollar view remains intact, with the latest momentum surge suggesting scope for gains toward 6.8300 while 6.7900 acts as strong support.

Momentum surge points to 6.8300

"24-HOUR VIEW: USD rose to a high of 6.7979 on Wednesday. Yesterday, we indicated that “despite the advance, upward momentum has not increased much.” However, we highlighted that “there is room for USD to rise further, but any advance is likely part of a higher range of 6.7850/6.8000 rather than a continued rise.” We did not expect upward momentum to accelerate, as USD surged to a high of 6.8195. The sharp rise appears to be overdone, and instead of continuing to rise, USD is more likely to consolidate today, probably between 6.8030 and 6.8185."

"1-3 WEEKS VIEW: We turned positive on USD late last week. On Monday (22 Jun, spot at 6.7840), we indicated that “there is no clear increase in upward momentum, but USD could test 6.8000 next.” After USD rose to a high of 6.7979 on Tuesday, we highlighted yesterday (24 Jun, spot at 6.7930) that “while upward momentum has not increased much further, a break of 6.8000 could lead to a move to 6.8080, potentially 6.8200.” We did not expect USD to soar toward 6.8200 so quickly, as it reached a high of 6.8195. This time around, there is a surge in momentum. From here, USD could rise toward 6.8300. We will maintain our positive USD view as long as it holds above 6.7900 (‘strong support’ level was at 6.7750 yesterday)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)