USD/CNH: Further losses emerge on a breach of 6.5000 – UOB

USD/CNH could re-visit 6.4850 if 6.5000 is cleared in the next weeks, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “We did not anticipate the relatively sharp drop in USD to 6.5031 yesterday (we were expecting USD to trade between 6.5210 and 6.5410). Despite the rebound from the low, the weakness in USD has yet to stabilized. From here, USD could test the major support at 6.5000 first before a more sustained recovery can be expected (next support is at 6.4850). Resistance is at 6.5180 followed by 6.5250.”

Next 1-3 weeks: “We have held a negative view in USD since the middle of last week. While USD weakened as expected, the pace of decline was slow and downward momentum was lackluster. Yesterday (19 Apr, spot at 6.5300), we highlighted that USD ‘has to move and stay below 6.5150 within these couple of days or the odds for further USD weakness would diminish quickly’. USD subsequently plummeted to 6.5031 before closing at 6.5100 (-0.28%). Downward momentum has improved, albeit not by all that much. That said, the risk for USD is still on the downside and we continue to eye our initial ‘objective’ at 6.5000. A clear break of this level would shift the focus to 6.4850. On the upside, a breach of 6.5350 (‘strong resistance’ level previously at 6.5530) would indicate that the downside risk has dissipated.”