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USD/CNH could weaken to the 7.0400 area in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to ‘trade at a lower range’ last Friday and the subsequent sharp and rapid drop came as a surprise (USD dropped to a low of 7.0679). The rapid drop appears to be running ahead of itself and further sustained weakness is unlikely, at least for today. From here, USD is more likely to consolidate and trade between 7.0600 and 7.1000.”

Next 1-3 weeks: “Our latest narrative was from last Wednesday (03 Jun, spot at 7.1050) wherein ‘a daily closing below 7.0850 could signal the start of a deeper decline in USD’. USD plummeted last Friday (05 Jun) and closed on a weak note at 7.0685. While oversold shorter-term conditions could lead to a couple of days of consolidation first, barring a move above 7.1210 (‘strong resistance’ level), USD could weaken further to 7.0400 in the coming days.”