The positive momentum in USD/CNH could extend to the 6.5500 level and beyond in the next weeks, commented UOB Group’s FX Strategists.
Key Quotes
24-hour view: “We did not anticipate the sudden and impulsive surge in USD that sent it rocketing to a 3-1/2 month high of 6.5289. The outsized and rapid rally appears to be overdone and USD is unlikely to strengthen much further. On the other hand, it is too soon to expect a sizeable pullback. All in, USD is more likely to trade between 6.5000 and 6.5330.”
Next 1-3 weeks: “We have expected USD to trade within a 6.4400/6.5000 range since the middle of last week. Yesterday (27 Jul), we highlighted that ‘looking ahead, the upside risk appears to greater but USD has to close above 6.5000 before a sustained advance can be expected’. That said, we did not anticipate the sudden surge in USD during Asian session and the subsequent strong daily closing of +0.71% (its biggest 1-day advance in 9-1/2 months). The strong boost in momentum suggests that USD is likely to strengthen further to 6.5500, possibly 6.5880. The positive outlook for USD is deemed intact as long as USD does not move below the ‘strong support’ level (currently at 6.4820).”