According to FX Strategists at UOB Group, USD/CNH still faces increasing downside risks in the next weeks.
Key Quotes
24-hour view: “We highlighted yesterday that ‘solid improvement in momentum suggests further USD weakness but 6.7660 is likely out of reach for today’. The pace and extent of the decline in USD exceeded our expectation as USD dropped to within a few pips of 6.7660 (overnight low of 6.7663). While downward momentum has eased a tad as USD rebounded from the low, there is room for USD to dip below 6.7660 first before a more sustained recovery can be expected. For today, the next support at 6.7500 is unlikely to come into the picture. Resistance is at 6.7900 but the stronger level is at 6.8020.”
Next 1-3 weeks: “Yesterday (14 Sep, spot at 6.8300), we highlighted that ‘as long as 6.8550 (‘strong resistance’ level previously at 6.8800) is intact, there is still a slim chance that USD could push lower towards the support at 6.8000’. However, the speed of the subsequent decline was not exactly expected as USD plummeted to 6.8057 before cracking 6.8000 just a while ago. The sudden surge in momentum indicates that the negative phase that started in mid-August (see annotations in the chart below) has received a new lease of life. From here, the next level to focus on is at 6.7660 followed closely by 6.7500. Overall, the current negative phase is deemed as intact as long as 6.8300 is not taken out (‘strong resistance’ level was at 6.8550 yesterday).”
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