USD/CNH to test 7.1500 before a pullback can be expected – UOB Group

There is scope for US Dollar (USD) to test 7.1500 before a pullback can be expected; 7.1600 is unlikely to come into view. In the longer run, upward momentum continues to increase; if USD breaks above 7.1500, the next 'level to watch is 7.1600, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Upward momentum continues to increase

24-HOUR VIEW: "USD soared to a high of 7.1400 on Wednesday. Yesterday, Thursday, when USD was at 7.1340, we stated that 'while the sharp rise appears to be overdone, there is scope for USD to test 7.1420 before the risk of a pullback increases.' We pointed out that ‘we do not expect the major resistance at 7.1500 to come into view today.' USD subsequently soared, but did not reach 7.1500 (high was 7.1480). Not surprisingly, conditions are overbought after the sharp advance over the past couple of days. However, this time around, there is scope for USD to test 7.1500 before a pullback can be expected. Based on the overbought momentum, the next major resistance at 7.1600 is unlikely to come into view. Support levels are at 7.1380 and 7.1330."

1-3 WEEKS VIEW: "On Monday (22 Sep, spot at 7.1185), we highlighted that USD 'appears to have entered a consolidation phase, but given the slightly firmer underlying tone, it is likely to test the top of the expected 7.1000/7.1360 range first.' After USD soared to a high of 7.1400, we highlighted yesterday (25 Sep, spot at 7.1340) that 'while the increasing upward momentum could lead to further advances in USD, it is worth noting that 7.1500 is a significant resistance level.' USD subsequently rose to a high of 7.1480. Upward momentum continues to increase, and if USD breaks above 7.1500, the next level to watch is 7.1600. On the downside, a breach of 7.1250 (‘strong support’ level was at 7.1150 yesterday) would mean that USD is not rising further."