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USD/CNH has now shifted its focus to the 6.8850 level, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘USD could drop below the overnight low of 6.9056 but odds for a breach of 6.8950 are not high’. While our view was not wrong as the decline in USD stopped at 6.8981, the strong rebound during NY hours was unexpected (overnight high of 6.9247). The rapid rebound is unlikely to be sustained but for today, USD could extend its gains to 6.9310 before a pullback can be expected (next resistance is at 6.9400). On the downside, support is at 6.9150 followed by 6.9050. For today, the 6.8981 low is not expected to come into the picture.”

Next 1-3 weeks: “We noted yesterday (18 Aug. spot at 6.9315) that ‘if there is a NY closing below 6.9300, it would indicate the start of a period of sustained weakness in USD that could lead to a move to 6.9050, possibly even to 6.8850’. We added, ‘the prospect for the start of a negative phase is rather high unless USD moves above 6.9400 within these 1 to 2 days’. USD subsequently dropped to within a few pips of 6.9050 (overnight low of 6.9056) before ending the day on a weak note at 6.9079 (-0.36%). In other words, the price actions suggest USD has moved into a negative phase and the next level to focus on is 6.8850. On the upside, the ‘strong resistance’ level at 6.9400 remains unchanged for now.”