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FX Strategists at UOB Group expect the upside momentum in USD/CNH to fade on a breakdown of the 6.5000 level in the near-term.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘while overbought, USD could advance further to 6.5650’. While USD advanced as expected, it only touched 6.5628 before pulling back sharply. The rapid pullback appears to be running ahead of itself and further sustained USD weakness is unlikely. USD is more likely to consolidate and trade between 6.5050 and 6.5400.”

Next 1-3 weeks: “We have held a positive view in USD for about 3 weeks now. In our latest narrative from yesterday (09 Mar, spot at 6.5560), we highlighted that ‘the pace of advance in USD is more rapid than expected and the focus has shifted to 6.5970’. We did not anticipate the sudden and sharp sell-off to a low of 6.5118 during NY hours (high has been 6.5628). The rapid loss in momentum has diminished the odds for further USD strength but only a break of 6.5000 (no change in ‘strong support’ level) would indicate that the 3- week positive phase in USD has come to an end.”