USD/CNH now risks some downside to 6.7000 – UOB

In view of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, USD/CNH could now drift lower to, initially, the 6.7000 region in the next weeks.

Key Quotes

24-hour view: “The sharp sell-off in USD that resulted in a loss of 0.81% (close at 6.7413) came as a surprise. We were expecting USD to ‘trade sideways’. The rapid drop appears to be overdone and USD is unlikely to weaken much further. For today, USD is more likely to trade between 6.7220 and 6.7620.”

Next 1-3 weeks: “Yesterday (17 May, spot at 6.4940), we noted that upward momentum is beginning to wane and we were of the view that the risk of a short-term top has increased. USD subsequently cracked our ‘strong support’ at 6.7650 as it sold off sharply to 6.7260. The break of the ‘strong support’ indicates that the month-long USD strength has run its course. We view the current movement as the early stages of a pullback. Support is at 6.7000 followed by 6.6700. Overall, only a break of 6.7950 (‘strong resistance’ level) would indicate that USD is not ready to pullback to 6.7000.”