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UOB Group’s FX Strategists noted that the outlook for USD/CNH remains tilted to the downside in the short-term horizon.

Key Quotes

24-hour view: “Yesterday, we held the view that USD ‘could test the major support at 6.3550 first before a more sustained recovery can be expected’. USD subsequently dropped to 6.3526 before rebounding (overnight high of 6.3744). Downward pressure has eased and while there is room for the recovery to extend, any advance is likely limited to a test of 6.3800. Support is at 6.3600 followed by 6.3530.”

Next 1-3 weeks: “We have expected USD to weaken since last week. In our latest narrative from yesterday (31 May, spot at 6.3700), we indicated that ‘risk for USD remains on the downside and a break of 6.3550 would shift the focus to 6.3300’. USD subsequently dropped to 6.3526 before rebounding. While the focus is at 6.3300 now, oversold conditions suggest that this level may not come into the picture so soon. All in, only a breach of the 6.4000 (no change in ‘strong resistance’ level) would indicate that the current weakness in USD has run its course.”