USD/CNH: Extra gains to 6.4950 now seem unlikely – UOB

USD/CNH’s potential upside to the 6.4950 level lost momentum, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted last Friday that USD ‘could break 6.4780 but the next resistance at 6.4900 is unlikely to come into the picture’. The subsequent USD strength exceeded our expectation as it rose to 6.4909. However, we did not anticipate the sharp sell-off from the high as USD plummeted to 6.4692. The rapid drop appears to be running ahead of itself and USD is unlikely to weaken much further. For today, USD is more likely to trade between 6.4670 and 6.4810.”

Next 1-3 weeks: “Last Friday (02 Jul, spot at 6.4740), we indicated that ‘upside risk is building but USD has to break 6.4950 before a sustained advance can be expected’. We added, ‘the prospect of USD to break 6.4950 is not high for now but it would remain intact as long as USD does not move below the ‘strong support’ level at 6.4590 within these few days’. USD subsequently rose to 6.4909 before dropping back down quickly. While there is no change in our view, the prospect for USD to move clearly above 6.4950 has diminished considerably. That said, only a break of 6.4590 would indicate that the upside risk has dissipated.”