USD/CNH: Bears may try to break below 7.1500 – UOB Group

Further advance in US Dollar (USD) seems likely, but it is unlikely to reach 7.2050, not to mention 7.2300, UOB Group Quek Ser Leang and Lee Sue Ann note.

Breaking below 7.1500 is quite possible

24-HOUR VIEW: “After USD fell to 7.1317 two days and rebounded, we indicated yesterday that ‘the decline seems to have stabilised.’ We expected USD to ‘trade in a 7.1350/7.1630 range.’ Instead of trading in a range, USD lifted off in NY trade, soaring to a high of 7.1843. The rapid rise has gathered momentum, and further advance in USD seems likely. However, the resistance at 7.2050 is likely out of reach for now (minor resistance is at 7.1950). To maintain the buildup in momentum, USD must remain above 7.1650 with minor support at 7.1750.”

1-3 WEEKS VIEW: “We have held a negative view in USD since late last month. In our latest narrative from two days ago (14 Aug, spot at 7.1500), we indicated that ‘while downward momentum has been boosted, it is unclear at this time if it is sufficiently enough for USD to break below 7.0635.’ We added, ‘the bias remains on the downside as long as 7.1850 (‘strong resistance’ level) is not breached.’ Yesterday, USD soared, reaching a high of 7.1843. While our ‘strong resistance’ level of 7.1850 has not been clearly breached, downward momentum has faded. Not only has USD weakness stabilised, but upward momentum is also building. From here, we expect USD to edge higher, but given that upward momentum is only beginning to build, any advance is unlikely to reach 7.2300. On the downside, should USD break below 7.1500, it would suggest the momentum buildup has eased.”