USD/CNH risks a deeper pullback below 6.9300 – UOB

According to FX Strategists at UOB Group, USD/CNH faces further downside pressure if 6.9300 is breached.

Key Quotes

24-hour view: “Our expectation for USD to ‘move higher’ last Friday did not materialize as it traded in a quiet manner between 6.9396 and 6.9526 before closing at the low of 6.9396 (-0.14%). The soft price action upon opening this morning suggests the bias is tilted to the downside. That said, in view of the lackluster momentum, a break of last week’s low at 6.9280 is unlikely. Resistance is at 6.9470 but only a move above 6.9530 would indicate the current mild downward pressure has eased.”

Next 1-3 weeks: “On Tuesday (11 Aug, spot at 6.9620), we highlighted that ‘while USD could still weaken further out, for the next 1 to 2 weeks, USD is likely to consolidate and trade sideways within a 6.9300/6.9800 range’. USD is currently holding just above 6.9300 and if there is a NY closing below this relatively strong support level, it would indicate the start of a period of sustained weakness in USD that could lead to a move to 6.9050, possibly even to 6.8850. At this stage, the odds for such a scenario are quite high and only a move back above 6.9700 within these few days would indicate that USD is still trading in a consolidation phase.”