USD/CNH does not rule out further weakness – UOB

FX Strategist at UOB Group remain bearish on USD/CNH but a move to the 0.6030 level looks unlikely in the near-term.

Key Quotes

24-hour view: “While we expected USD to weaken further yesterday, we held the view that ‘a sustained drop below the major support at 6.6450 is unlikely’. We clearly underestimated the weakness in USD as it plunged to a low of 6.6275. Downward momentum is beginning to show sign of slowing and this coupled with the still rather oversold conditions suggests that further USD weakness is unlikely for today. That said, it is too early to expect a sustained recovery. USD is more likely to consolidate and trade between 6.6300 and 6.6650.”

Next 1-3 weeks: “We highlighted yesterday (20 Oct, spot at 6.6730) that ‘downward momentum in USD has improved further; next level to focus on is at 6.6450’. USD dropped to a low of 6.6563 during NY hours and closed on a soft note at 6.6647 (-0.21%). While we continue to expect further USD weakness, oversold shorter-term conditions suggest a slower pace of decline. A break of 6.6450 would not be surprising but the next major support at 6.6030 may not come into the picture so soon. Overall, USD is expected to stay under pressure unless it can move above 6.6980 (‘strong resistance’ level was at 6.7050 yesterday).”