In opinion of FX Strategists at UOB Group, USD/CNH could now extend the upside to the 6.86 region in the next weeks.
Key Quotes
24-hour view: “While we expected USD to strengthen yesterday, we held the view that ‘6.8430 is likely out of reach’. The subsequent USD strength exceeded our expectation as it soared to a high of 6.8464. The advance was however short-lived, as USD dropped back to end the day largely unchanged at 6.8273 (+0.02%). Upward momentum has more or less dissipated and for today, USD is likely to trade sideways, expected to be between 6.8000 and 6.8400.”
Next 1-3 weeks: “Two days ago (22 Sep, spot at 6.7900), we highlighted that the ‘month-long negative phase has run its course’. We held view that the ‘rebound in USD has room to extend higher but any advance is viewed as part of a broad 6.7500/6.8300 range’. While our view was not wrong, the pace by which USD approaches 6.8300 was faster than expected (USD rose to an overnight high of 6.8283 before closing higher by +0.60%, its biggest 1-day gain in 2 months). The price actions suggest that the rebound could extend further towards 6.8600. At this stage, the odds for a sustained rise above this level are not high. On the downside, 6.8000 is a strong support but only a break of 6.7800 would indicate the current upward pressure has eased.”
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