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FX Strategists at UOB Group expect further decline in USD/CNH if the 6.9950 level is breached in the near-term.

Key Quotes

24-hour view: “We highlighted yesterday that ‘further USD weakness would not be surprising and a break of the critical support at 6.9950 could potentially trigger further selling’. USD dropped to 6.9965 before staging a swift and sharp rebound. Downward momentum has eased and from here, USD could edge higher. That said, any advance is viewed as part of a 7.0100/7.0380 range (a sustained advance above 7.0380 is not expected).”

Next 1-3 weeks: “We have held the view that USD is trading in consolidation phase for about 3 weeks. The manner by which the consolidation phase comes to an end was unexpected as USD staged a sudden lurch lower and plummeted by –0.78% yesterday (NY close of 7.0103). Downward momentum has picked up and the risk is for further USD weakness from here. A daily closing below the weekly trend-line support at 6.9950 could potentially lead to further sharp loss as the next support of note is not until 6.9500. All in, USD is expected to remain under pressure unless it can move back above 7.0550.”