USD/CNH could now test the 7.0500 region – UOB

The continuation of the bullish move could push USD/CNH to the 7.0500 area in the near term, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “The strong surge in USD to a high of 6.9991 came as a surprise (we were expecting USD to consolidate). USD continues to rise as it broke above 7.0000 in early Asian trade. Despite the break of the solid resistance at 7.0000, there is no significant increase in momentum. Today, USD could strengthen further but the next major resistance at 7.0500 is unlikely to come into view (minor resistance is at 7.0200). Support is at 6.9850, followed by 6.9750.”

Next 1-3 weeks: “Our most recent narrative was from last Thursday (11 May, spot at 6.9330) where we indicated that ‘upward momentum is beginning to build and USD is likely to trade with an upward bias’. However, we noted that both 6.9750 and 7.0000 are strong resistance levels. After holding below 6.9750 for a few days, USD jumped above this level and soared to a high of 6.9991 in NY trade before taking out 7.0000 today. The price actions continue to suggest the risk for USD is to the upside. The next level to watch is 7.0500. Overall, we will continue to hold a positive USD view as long as it holds above 6.9560 (‘strong support’ level previously at 6.9400).”