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A move above 6.4950 in USD/CNH could open the door to extra upside in the next weeks, noted FX Strategists at UOB Group.

Key Quote

24-hour view: “Yesterday, we highlighted that ‘the combination of oversold conditions and waning momentum suggest that the current movement is part of a consolidation phase’. Our view was incorrect as USD soared to 6.4773 before closing on a firm note at 6.4730 (+0.32%). Further USD strength is not ruled out but the rapid rise appears to be running ahead of itself and any advance is likely limited to a test of 6.4820. Support is at 6.4550 followed by 6.4450.”

Next 1-3 weeks: “Two days ago (06 Jan, spot at 6.4350), we indicated that USD ‘is expected to remain weak’ and ‘a break of 6.4000 would open up the way for a move lower to 6.3800’. USD rebounded to a high of 6.4773 yesterday and while our ‘strong resistance’ level at 6.4950 is still intact, downward momentum has waned and the prospect for USD to move below 6.4000 has diminished. In order to rejuvenate the flagging momentum, USD has to move and stay below 6.4450 within these 1 to 2 days or a break of 6.4950 (no change in ‘strong resistance’ level) would indicate the current weakness has run its course.”