USD/CNH could re-test 6.5360 near-term – UOB

FX Strategists at UOB Group see a potential upside in USD/CNH to the 6.5260 level in the next weeks.

Key Quotes

24-hour view: “Our expectation for USD to ‘edge lower’ was incorrect as it staged a robust and rapid bounce to 6.5008. While further USD strength would not be surprising, the strong surge appears to be running ahead of itself and a sustained rise above 6.5200 is unlikely. On the downside, a break of 6.4850 would indicate the current upward pressure has eased.”

Next 1-3 weeks: “About 2 weeks ago (15 Jan, spot at 6.4680), we indicated that ‘a clear break of 6.4900 could lead to a move to 6.5200’. While USD subsequently rose to 6.5075, it was unable to make any further headway on the upside. In our latest narrative from Tuesday (26 Jan, spot at 6.4870), we highlighted that ‘momentum has deteriorated further but only a break of 6.4450 would indicate that USD is not ready to move higher to 6.5200’. In that context, we did not anticipate the strong overnight surge in USD. From here, 6.5200 appears to be within reach and a break of this level would suggest further USD strength towards 6.5360. On the downside, the ‘strong support’ level has moved higher to 6.4650 from 6.4450.”