USD/CNH: scope for extra consolidation near-term – UOB

FX Strategists at UOB Group believe the pair is posed for the continuation of the consolidative mood in the next weeks.

• "24-hour view: USD traded sideways yesterday between 7.0190 and 7.0350, narrower than our expected 7.0130/7.0350 range. While daily closing at 7.0325 is on the firm side (+0.22%), upward momentum has not improved by much. From here, USD could continue to trade sideways, albeit likely at a higher range of 7.0230/7.0430.
• Next 1-3 weeks: Two weeks ago (13 Nov, spot at 7.0200), we highlighted that USD has moved into a ‘broader consolidation phase’ and ‘USD is expected to trade sideways between 6.9750 and 7.0600 for a period’. When USD moved higher towards 7.0500, we indicated last Thursday (21 Nov, spot at 7.0475) that ‘we are not convinced that the current USD strength can be sustained’. We added, ‘only a clear move above 7.0600 would suggest further USD strength is likely’. The relatively sharp decline of -0.28% yesterday (26 Nov) reinforces our view. In other words, we continue to view the current movement in USD as part of a sideway-trading range. That said, after the rapid decline yesterday, we have adjusted the expected trading range to 6.9700/7.0500 from 6.9750/7.0600."