USD/CNH: A drop to 6.9645 remains on the table – UOB

There is still room for USD/CNH to re-visit the 6.9645 level in the short-term horizon, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “USD traded between 6.9950 and 7.0095 yesterday, narrower than our expected sideway-trading range of 6.9930/7.0140 before closing slightly lower at 6.9980 (-0.11%). The underlying tone has weakened somewhat and the bias for today is for a lower USD. That said, any weakness is likely limited to a test of 6.9820. Resistance is at 7.0050 followed by 7.0100.”

Next 1-3 weeks: “Our latest narrative was from last Thursday (23 Jul, spot at 7.0155) wherein USD ‘is in a corrective rebound but any advance is expected to face solid resistance at 7.0400’. USD subsequently popped to a high of 7.0301 but has since eased off. For now, there is no change in our view but the underlying tone has softened and from here, a break of 6.9750 would indicate that the correction phase has ended. To look at it another way, a breach of 6.9750 would increase the risk of USD moving below the month-to-date low at 6.9645. For now, the prospect for such a move is not high but it would continue to increase as long as USD does not move above 7.0300 within these few days.”