USD/CNH: Further decline to 6.6030 appears unlikely – UOB

USD/CNH’s outlook remains negative but a move to 6.6030 stays out of favour for the time being, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we held the view yesterday that ‘further USD weakness is unlikely’, we expected USD to ‘consolidate and trade between 6.6300 and 6.6650’. However, USD rebounded strongly to a high of 6.6772 (low has been 6.6408). The rapid rebound appears to be running ahead of itself but is not showing any sign of slowing down just yet. From here, barring a move below 6.6450, USD could grind higher but a break of the strong resistance at 6.6980 is unlikely.”

Next 1-3 weeks: “We have held a negative view in USD since last Friday, 16 Oct). In our latest narrative from Wednesday (21 Oct, spot at 6.6590), we indicated that USD ‘is still weak but the next major support at 6.6030 may not come into the picture so soon’. USD subsequently dropped to a low of 6.6275 before rebounding. Downward momentum is beginning to slow and this coupled with rather oversold conditions suggests 6.6030 could be out of reach this time round. That said, only a break of 6.6980 (no change in ‘strong resistance’ level) would indicate the risk for further USD weakness has eased.”