UOB Group’s FX Strategists noted USD/CNH risks a deeper pullback on a close below 6.4500.
Key Quotes
24-hour view: “The sharp drop in USD to a low 6.4585 last Friday came as a surprise. While there is scope for USD to weaken further, oversold conditions suggest that a break of the major support at 6.4500 is unlikely (minor support is at 6.4550). On the upside, a breach of 6.4750 (minor resistance is at 6.4700) would indicate that the current downward pressure has eased.”
Next 1-3 weeks: “We have expected USD to trade between 6.4600 and 6.5050 since last Tuesday (24 Aug, spot at 6.4790). On Friday (27 Aug), we highlighted that ‘looking ahead, the downside risk appears to be greater but USD has to close below the major support at 6.4500 before a sustained decline can be expected’. USD subsequently dropped to 6.4585 before closing at 6.4632 (-0.31%) and the prospect for USD to close below 6.4500 has increased (as long as it does not move above 6.4820 within these few days). Looking ahead, the next support below 6.4500 is at 6.4300.”