USD/CNH could attempt a move to 7.1000 – UOB

In view of FX Strategists at UOB Group, the outlook on USD/CNH stays positive and a test of 7.1000 in the next weeks looks probable.

Key Quotes

24-hour view: “We clearly did not expect the sudden and strong rally in USD yesterday. The rapid rise is running ahead of itself and while USD could move above the NY high of 7.0865, a sustained rise above this level appears unlikely. On the other hand, after the strong surge, it is too early to expect a significant pull-back. Overall, USD is likely to trade sideways to slightly higher from here, expected to be between 7.0550 and 7.0900”.

Next 1-3 weeks: “After trading mostly sideways for the past several weeks, USD staged a sudden and outsized rally of +0.32% (7.0652). While the ease by which strong resistance levels were taken out has shifted the risk to the upside, we are not convinced USD can maintain the pace of the current rally. From here, we see chance for USD to test the 7.1000 resistance but the prospect for a sustained rise above the major 7.1200 level is not high. Overall, USD is expected to trade on firm footing unless it drops below the ‘strong support’ level of 7.0400”.

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