USD/CNH: Still room for a visit to 7.0500 – UOB

Extra upside could still motivate USD/CNH to test the 7.0500 region in the short-term horizon, comment FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted last Friday that ‘the rapid rise appears to be running ahead of itself but in view of the solid momentum, USD could strengthen further to 7.0300 before a pullback is likely’. We added, ‘the major resistance at 7.0500 is unlikely to come into view’. While our view was not wrong as USD soared to 7.0427, the pullback from the high was sharper than expected (low has been 6.9982). The pullback could extend but is not expected to break 6.9800 (minor support is at 6.9900). Resistance levels are at 7.0100 and 7.0210.”

Next 1-3 weeks: “We turned positive on USD in the middle of last week. As USD soared, in our latest narrative from Friday (16 Sep, spot at 7.0100), we indicated that the surge in momentum is likely to lead to further rapid rise in USD. We added, ‘the level to watch is at 7.0500’. USD subsequently soared to 7.0427 before pulling back sharply. While the sharp pullback from the high has dented the upward momentum somewhat, there is still chance for USD to advance to 7.0500. Only a break of 6.9660 (no change in ‘strong support’ level from last Friday) would indicate that the current upward pressure has eased.”