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FX Strategists at UOB Group now expect USD/CNH to drop further on a breach of the 6.9300 level.

Key Quotes

24-hour view: “While we held the view that USD ‘could dip below 6.9645’ yesterday, we did not anticipate the subsequent sharp sell-off that sent USD to a low of 6.9325. The sharp and rapid decline is severely oversold and further sustained weakness is unlikely for today. USD is more likely to consolidate and trade between 6.9350 and 6.9590.”

Next 1-3 weeks: “Our latest narrative was from Monday (03 Aug, spot at 6.9850) where we highlighted that ‘the downside risk still appears to be higher’ and added, ‘USD has to crack and close below the July’s low of 6.9645 before a sustained weakness can be expected’. While we are aware that 6.9645 is a critical support, we did not quite anticipate the sharp sell-off upon the break of this level (USD cracked 6.9645 and plunged to a low of 6.9325 yesterday). The current movement is viewed as the start of a negative phase and a break of the next critical support at 6.9300 could lead to a quick move to 6.9050. Resistance is at 6.9550 but only a break of 6.9730 (‘strong resistance’ level) would indicate that our view is wrong.”