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Following the recent price action, FX Strategists at UOB now see USD/CNH attempting a move to the 7.04 region in the next weeks.

Key Quotes

24-hour view: “We expected USD to strengthen yesterday but held the view ‘7.0000 is unlikely to come into the picture’. However, USD popped to a high of 7.0038 before dropping back quickly. The rapid pull-back amid overbought conditions suggest 7.0038 could be an interim top. The current movement in USD is likely the early stages of a consolidation phase. In other words, we expect USD to trade sideways for today, likely between 6.9650 and 6.9950.”

Next 1-3 weeks: “The advance above 7.0000 yesterday (30 Jan) was short-lived as USD retreated quickly from 7.0038 to end the day at 6.9830 (+0.19%). Our latest narrative from Tuesday (28 Jan, spot at 6.9780) remains unchanged wherein USD “could extend its gains to 7.0400”. However, after yesterday’s price action, the odds for such a move have diminished somewhat but only a breach of 6.9350 (no change in ‘strong support’ level) would indicate the current USD strength has run its course.”