In light of the ongoing price action, USD/CNH faces a potential consolidation ahead of a probable retracement in the near term, suggested FX Strategists at UOB Group Quek Ser Leang and Peter Chia.
Key Quotes
24-hour view: “We did not expect the sharp drop in USD to 6.6480 and the subsequent strong bounce from the low (we were expecting USD to consolidate). The rapid decline appears to be overdone and the 6.6480 low is not expected to come back into the picture, at least not for today. Overall, USD is more likely to trade sideways within a range of 6.6550/6.6950.”
Next 1-3 weeks: “We highlighted yesterday (03 May, spot at 6.6915) that USD could break 6.6700 and we indicated that the next support is at 6.6500. That said, we did not quite expect USD to break both levels so quickly (USD dropped to 6.6480 before rebounding). Further USD weakness is not ruled out but deeply oversold shorter-term conditions could lead to a few days of consolidation first. All in, as long as 6.7300 (strong resistance level was at 6.7550 yesterday) is not breached, there is room for USD to weaken further to the next support at 6.6300.”