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Further downside in USD/CNH is expected in case 6.9300 is cleared in the near-term, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for USD to ‘weaken to 6.9210’ was wrong as it staged a sharp and rapid rebound after touching a low of 6.9280 (overnight high of 6.9530). While the rapid rise has scope to extend higher, any advance is expected to face solid resistance at 6.9600. On the downside, support is at 6.9430 followed by 6.9350.”

Next 1-3 weeks: “On Tuesday (11 Aug, spot at 6.9620), we highlighted that ‘while USD could still weaken further out, for the next 1 to 2 weeks, USD is likely to consolidate and trade sideways within a 6.9300/6.9800 range’. USD is currently holding just above 6.9300 and if there is a NY closing below this relatively strong support level, it would indicate the start of a period of sustained weakness in USD that could lead to a move to 6.9050, possibly even to 6.8850. At this stage, the odds for such a scenario are quite high and only a move back above 6.9700 within these few days would indicate that USD is still trading in a consolidation phase.”