Prospects for extra downside in USD/CNH appears diminished near-term, noted FX Strategists at UOB Group.
24-hour view: “We expected USD to weaken yesterday but we were of the view that ‘the major support at 6.4700 is unlikely to come into the picture’. Our view was not wrong as the decline in USD stopped at 6.4713. USD traded on a firm note after opening in Asia and the loss in downward momentum suggests that further USD weakness is unlikely. USD is more likely to trade sideways between 6.4730 and 6.4930.”
Next 1-3 weeks: “Our latest narrative was from last Friday (23 Apr, spot at 6.4900) where we indicated that ‘risk is still for a lower USD but any weakness is expected to encounter solid support at 6.4700’. USD dropped to 6.4713 yesterday (26 Apr) before rebounding. The rebound ahead of the solid support coupled with oversold conditions suggests that the prospect for further USD weakness is not high. That said, only a break of 6.5050 (‘strong resistance’ level previously at 6.5200) would indicate that the weakness in USD that started about 2 weeks ago has come to an end.”