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USD/CNH could drop to the 6.4700 area on a break below 6.4850, said FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we highlighted that USD ‘could test the major support at 6.5000 first before a more sustained recovery can be expected’. We added, ‘the next support is at 6.4850’. USD subsequently dropped to 6.4885 before recovering. The combination of oversold conditions coupled with waning momentum suggest USD is unlikely to weaken further. For today, USD is more likely to trade sideways between 6.4900 and 6.5150.”

Next 1-3 weeks: “We highlighted yesterday that ‘downward momentum has improved, albeit not by all that much’. However, we were of the view that ‘a clear break of 6.5000 would shift the focus to 6.4850’. USD subsequently dropped to 6.4885 before recovering. There is no change in our view and we continue to see downside risk in USD. Looking ahead, the next support below 6.4850 is at 6.4700. On the upside, a breach of 6.5300 (‘strong resistance’ level was at 6.5350 yesterday) would indicate that the downside risk has dissipated.”

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