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FX Strategists at UOB Group believe USD/CNH could embark into a deeper retracement if 6.9300 is cleared in the near-term.

Key Quotes

24-hour view: “Our expectation for the recovery in USD to ‘extend higher’ was wrong as it dropped to an overnight low of 6.9315 before ending the day on a soft note at 6.9325 (-0.14%). Downward momentum has improved but not by much and from here, USD could weaken towards 6.9210. At this stage, the odds for a move to the next support at 6.9050 are not high. Resistance is at 6.9400 followed by 6.9500.”

Next 1-3 weeks: “On Tuesday (11 Aug, spot at 6.9620), we highlighted that ‘while USD could still weaken further out, for the next 1 to 2 weeks, USD is likely to consolidate and trade sideways within a 6.9300/6.9800 range’. USD is currently holding just above 6.9300 and if there is a NY closing below this relatively strong support level, it would indicate the start of a period of sustained weakness in USD that could lead to a move to 6.9050, possibly even to 6.8850. At this stage, the odds for such a scenario are quite high and only a move back above 6.9700 within these few days would indicate that USD is still trading in a consolidation phase.”