FX Strategists at UOB Group see USD/CNH facing a tough barrier around the 6.6100 level in the short-term horizon.
24-hour view: “The sudden lurch lower in USD to 6.5536 came as a surprise. While further USD weakness is not ruled out, the sharp drop appears to be running ahead of itself and any further decline is likely limited to a test of 6.5500. Resistance is at 6.5690 followed by 6.5750.”
Next 1-3 weeks: “We noted yesterday that ‘while it is too soon to expect a pullback, the rally in USD is deep in overbought territory’. We added, ‘USD could move above 6.5900 but the next major resistance at 6.6100 could be out of reach this time round’. USD subsequently dropped to 6.5536. While our ‘strong support’ level at 6.5440 is still intact, the rapid loss in momentum has diminished the prospect for further USD strength to 6.6100. Unless USD can move and stay above 6.5750 within these 1 to 2 days, a break of 6.5440 would not be surprising and would indicate that the positive phase in USD that started in late March has run its course.”