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FX Strategists at UOB Group see USD/CNH facing a deeper decline if 6.4130 is cleared in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘strong downward momentum suggests USD is likely to weaken further to 6.4280’. The subsequent weakness in USD exceeded our expectation as it plunged to 6.4180 before closing on a weak note at 6.4189 (-0.39%). Further USD weakness is not ruled out severely oversold conditions suggest that any decline is likely limited to a test of last month’s low near 6.4130. The next support at 6.4000 is not expected to come into the picture. On the upside, a break of 6.4450 (minor resistance at 6.4350) would indicate the current downward pressure has eased.”

Next 1-3 weeks: “Yesterday (09 Feb, spot at 6.4415), we highlighted that ‘risk has shifted to the downside but expect solid support at 6.4130’. While there is no change in our view, we did not anticipate the sharp and rapid sell-off to 6.4180. From here, a break of 6.4130 would indicate USD could weaken further to 6.4000. Looking ahead, the next support below 6.4000 is at 6.3800. On the upside, a break of 6.4600 (‘strong resistance’ level was at 6.4750 yesterday) would indicate the current downside risk has dissipated.”