USD/CNH: Short-term bottom in place? – UOB

FX Strategists at UOB Group believe USD/CNH’s rebound could extend to the 6.7450 level in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘while overbought, the rapid advance has room to test 6.7200 first before a more sustained pullback can be expected’. We added, ‘the next resistance at 6.7450 is unlikely to come under threat’. USD subsequently popped to a high of 6.7236, dropped back down to 6.6932 before snapping back up. Upward momentum is strong and USD could strengthen further even though overbought conditions suggest that a sustained rise above 6.7450 is unlikely (minor resistance is at 6.7330). On the downside, a break of 6.6890 would indicate that the current upward pressure has eased (minor support is at 6.6950).”

Next 1-3 weeks: “We have held a negative view in USD since early last week. As USD rebounded after touching a low of 6.6275, we highlighted last Friday (23 Oct, spot at 6.6760) that ‘slowing downward momentum and oversold conditions suggests that 6.6030 could be out of reach this time round’. We added, ‘a break of 6.6980 would indicate the risk for further USD weakness has eased’. USD blew past 6.6980 yesterday (26 Oct) and hit a high of 6.7172. The price action suggests that 6.6275 is a short-term bottom and this level may not come back into the picture within these couple of weeks. The current movement is viewed as part of a ‘corrective recovery’ that has scope to extend to 6.7450. Overall, USD is expected to trade with an upward bias for now as long as it does not move below the ‘strong support’ level at 6.6530. On a shorter-term note, 6.6660 is already quite a solid level.”