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UOB Group’s FX Strategists believe the upside momentum in USD/CNH could be losing traction.

Key Quotes

24-hour view: “We highlighted yesterday that ‘there is room for USD to test 6.4650 first before a recovery can be expected’. The subsequent weakness exceeded our expectation as USD dropped to 6.4605 before extending its decline this morning. Rapid improvement in downward momentum suggests further weakness but any decline is expected to face solid support at 6.4450 (minor support is at 6.4500). Resistance is at 6.4680 followed by 6.4750.”

Next 1-3 weeks: “We highlighted on Monday (18 Jan, spot at 6.4680) that ‘upward momentum is beginning to improve and a clear break of 6.4900 could lead to a move to 6.5200’. While USD subsequently broke 6.4900, it retreated quickly after touching 6.5075. Upward momentum has been dented somewhat but there is still chance for USD to move 6.5200. Only a break of 6.4450 (no change in ‘strong support’ level) would indicate that USD is not ready to move to 6.5200 just yet.”