USD/CNH still faces the prospects of extra downside in the next weeks, according to FX Strategists at UOB Group.
Key Quotes
24-hour view: “We highlighted yesterday that ‘downward momentum appears to have eased and this coupled oversold condition suggests limited downside risk’ and we expected USD to ‘consolidate and trade between 6.4100 and 6.4360’. While our view for consolidation was not wrong, USD traded within a narrower range than expected (6.4162/6.4319). We continue to view the current price actions as part of a consolidation. However, the slightly improved underlying tone suggests USD is likely to trade within a higher range of 6.4180/6.4400.”
Next 1-3 weeks: “There is not much to add to our update from Monday (10 May, spot at 6.4220). As highlighted, the risk for USD is still on the downside but in view of the deeply oversold shorter-term conditions, the year-to-date low near 6.3980 may not come into the picture so soon. The downside risk is deemed intact as long as USD does not move above 6.4640 (no change in ‘strong resistance’ level).”