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Following the recent price action, USD/CNH is likely to embark on a consolidative trip in the near-term, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to ‘consolidate further within a 6.8200/6.8430 range’ yesterday but it rebounded to a high of 6.8493 (low has been 6.8250). The recovery lacks momentum and while there is room for USD to test the 6.8530 resistance from here, a sustained advance above this level is unlikely. Support is at 6.8320 followed by 6.8250.”

Next 1-3 weeks: “Yesterday (01 Sep, spot at 6.8480), we highlighted that ‘such lackluster price actions upon a breach of major support indicates either USD is not ready for further losses or it is biding time for a more aggressive decline later on’ and added, ‘we believe it is latter scenario’. We expected ‘the current weakness to extend to 6.8300, possibly 6.8160’. USD subsequently plummeted and quickly exceeded the 6.8160 level as it dropped to a low of 6.8143. From here, we continue to see risk for further USD weakness even though oversold conditions could lead to a few days of consolidation first. Only a break of 6.8800 (‘strong resistance’ level was at 6.8950 yesterday) would indicate that the current weak phase in USD that started about 2 weeks ago has run its course. Until then, the roundnumber support level of 6.8000 is likely beckoning to USD.”

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