USD/CNH: Further downside now looks unfavoured – UOB

In opinion of FX Strategists at UOB Group, the idea of a weaker USD/CNH seems to have lost some traction in past sessions.

Key Quotes

24-hour view: “We highlighted yesterday, the ‘advance in USD has scope to extend higher’ but we were of the view that ‘the resistance at 6.8660 is likely out of reach’. We noted that ‘6.8600 is already quite a strong level’. While our view was not wrong as the advance in USD stopped at 6.8606, the subsequent sharp pullback from the high was not exactly expected (overnight low of 6.8305). There is a slight improvement in downward momentum and this could lead to USD edging lower towards the 6.8250 support. For today, the prospect for a sustained decline below this level is not high (next support is at 1.6150). Resistance is at 6.8420 followed by 6.8500.”

Next 1-3 weeks: “Our latest narrative was from Monday (07 Sep, spot at 6.8360) wherein ‘downward momentum has eased somewhat but there is still chance for USD to push lower towards 6.8000’. Momentum has eased further as USD staged a relatively strong advance of +0.32% yesterday (NY close of 6.8536). From here, unless USD moves and stays below 6.8350 within these 1 to 2 days, a breach of the ‘strong resistance’ at 6.8800 (no change in level) would not be surprising and would indicate that the negative phase in USD that started in midAugust has run its course. To put it another way, the odds for further USD weakness have diminished considerably.”