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Further upside in USD/CNH is likely to test the 6.8600 region in the next weeks, according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “Last Friday, we expected USD to ‘trade sideways between 6.8000 and 6.8400’. USD subsequently traded within a narrower and slightly higher range than expected (6.8110/6.8448) before closing little changed at 6.8236 (-0.05%). Momentum indicators are mostly neutral and further sideway-trading would not be surprising, likely between 6.8100 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.”