The upside momentum in USD/CNH has improved and allows a potential move to 6.5150 in the next weeks, noted UOB Group’s FX Strategists.
24-hour view: “Our expectation for USD to ‘edge lower’ was incorrect as it staged a surprisingly sharp rally to an overnight high of 6.4970. USD extended its gains to 6.5080 during early Asian hours but has since retreated. The rapid retreat amid overbought conditions suggests further USD strength is unlikely. USD is more likely to consolidate, expected to be between 6.4600 and 6.5000.”
Next 1-3 weeks: “We have held a positive view in USD for more than a week now. After USD eased from 6.4760, we noted yesterday (25 Feb, spot at 6.4500) that ‘upward momentum has deteriorated further’. We added, USD ‘has to move and stay above 6.4700 within these 1 to 2 days or break of 6.4200 would indicate positive phase has ended’. USD surged overnight and extended its gains to 6.5080 during Asian hours. Upward momentum has been boosted and we see room for USD to move towards the major resistance at 6.5150. On the downside, the ‘strong support’ level has moved higher to 6.4400 from 6.4200.”