USD/CNH: Further downside seems to have lost traction – UOB

Extra decline in USD/CNH appears to have lost some momentum as of late, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we noted that ‘the underlying tone has softened but any weakness from here is viewed as a lower trading range of 6.8250/6.8450’. We added, ‘a sustained decline below 6.8250 is not expected’. While USD subsequently traded sideways, it is within a narrower range than expected (between 6.8280 and 6.8393). The muted price action offers no fresh clues and the current movement is still viewed as part of a consolidation phase. In other words, we continue to expect USD to trade sideways, likely between 6.8250 and 6.8450.”

Next 1-3 weeks: “Our latest narrative was from last Wednesday (02 Sep, spot at 6.8355) wherein ‘oversold short-term conditions could lead to consolidation first but overall risk is for further USD weakness towards 6.8000’. Our view was not wrong as USD traded in a relatively quiet manner for the past few days. While downward momentum has eased somewhat, the negative phase in USD that started in mid-August still has chance to push lower towards the round-number support level of 6.8000. Only a move above 6.8800 (no change in ‘strong resistance’ level) would indicate the negative phase in USD has run its course.”