USD/CNH risks a drop to 6.3500 – UOB

USD/CNH looks poised to extend the downside to the 6.3500 level in the next weeks, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we expected USD to ‘edge lower’ and we were of the view that ‘any weakness is expected to encounter strong support at 6.3680’. We did not anticipate the sharp sell-off that sent USD plummeting to 6.3605. The swift and sharp drop appears to be running ahead of itself but there is room for USD to dip to 6.3560. For today, the major support 6.3500 is likely out of reach. Resistance is at 6.3680 followed by 6.3730.”

Next 1-3 weeks: “We noted yesterday (12 Jan, spot at 6.3760) that the recent build-up in upward momentum has fizzled out and we expected USD to trade between 6.3600 and 6.3900. We did not anticipate the rapid manner by which USD approaches the bottom of the expected range as USD dropped to 6.3605. Downward momentum is beginning to build and USD is expected to trade with a downward bias towards 6.3500. A breach of 6.3780 (‘strong resistance’ level) would indicate that our view is wrong.”