FX Strategists at UOB Group noted USD/CNH remains within the oversold territory, although a move to the 6.7165 level looks unlikely for the time being.
24-hour view: “We noted yesterday that ‘further USD weakness is not expected for today’ and held the view that USD ‘is more likely to consolidate and trade between 6.7450 and 6.7750’. We underestimated the volatility as USD traded within a wider range than expected (between 6.7430 and 6.7823). While conditions remains oversold, there is scope for USD to dip towards the 6.7380 support before a more sustained rebound can be expected (minor support is at 6.7450). Resistance is at 6.7650 followed by 6.7750.”
Next 1-3 weeks: “Two days ago (15 Sep, spot at 6.7980) we highlighted that the negative phase that started in mid-August ‘has received a new lease of life’. We added, the next level to focus on is at 6.7660 followed by 6.7500. USD subsequently dropped at a furious pace and it cracked 6.7500 yesterday (low of 6.7429). Over the past 3 days, USD has lost a whopping -1.28%, its biggest 3-day loss in 20 months. It is not surprising that the rapid decline is oversold now. That said, downward momentum remains robust and the outlook for USD still remains weak. However, the pace of any further decline is likely to be slower and the next major support at 6.7165 may be out of reach this time round (there is a minor support 6.7300). Overall, only a break of 6.8100 (‘strong resistance’ level previously at 6.8230) would indicate that the current month-long negative phase has run its course.”
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