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According to FX Strategists at UOB Group, USD/CNH is expected to drop further and retest the 6.4960 level in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘oversold conditions suggest further USD weakness is unlikely’ and we expected USD to ‘consolidate and trade between 6.5120 and 6.5350’. Our view was not wrong as USD traded within a 6.5122/6.5355 range. Momentum indicators are mostly neutral and further consolidation would not be surprising. Expected range for today, 6.5100/6.5330.”

Next 1-3 weeks: “We noted last Wednesday that ‘downward momentum is improving but USD has to close below the year-to-date low of 6.5319 in order to indicate that next down-leg has started’. USD plummeted to a low of 6.5070 last Friday before closing at 6.5170 (-0.29%). While oversold shorter-term conditions could lead to a couple of days of consolidation first, USD is expected to weaken to 6.4960. Looking forward, the next support is at 6.4700. All in, the current weak phase is deemed as intact as long as USD does not move above 6.5650 (‘strong resistance’ level).”