In opinion of FX Strategists at UOB Group, USD/CNH could slip back to the 6.9645 level in the near-term.
Key Quotes
24-hour view: “Our expectation for USD to ‘drift lower to 6.9920’ did not materialize as USD dropped to 6.9970 before closing at 6.9993 (-0.22%). However, USD opened on a weak note this morning and has moved below 6.9900. Downward momentum has improved and the risk from here is for USD to weaken towards 6.9750. This level is quite a strong support and may not yield so easily. Resistance is at 6.9980 followed by 7.0040.”
Next 1-3 weeks: “Our latest narrative was from last Thursday (23 Jul, spot at 7.0155) wherein USD ‘is in a corrective rebound but any advance is expected to face solid resistance at 7.0400’. USD subsequently popped to a high of 7.0301 but has since eased off. For now, there is no change in our view but the underlying tone has softened and from here, a break of 6.9750 would indicate that the correction phase has ended. To look at it another way, a breach of 6.9750 would increase the risk of USD moving below the month-to-date low at 6.9645. For now, the prospect for such a move is not high but it would continue to increase as long as USD does not move above 7.0300 within these few days.”
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