USD/CNH: Retracement could retest 7.1500 ahead of 7.1300 – UOB

Further decline in USD/CNH could see the 7.1500 area revisited ahead of 7.1300 in the next weeks, comment Market Strategist at UOB Group Quek Ser Leang and Economist Lee Sue Ann.

Key Quotes

24-hour view: “While we held the view yesterday that USD ‘is unlikely to advance further’, we expected it to ‘trade between 7.2950 and 7.3550’. The subsequent sharp sell-off to a low of 7.1826 came as a surprise. The sharp and swift selloff is deeply oversold but with no sign of stabilization just yet, USD could weaken further. However, a clear break of 7.1500 is unlikely. Resistance is at 7.2050 but only a break of 7.2350 would indicate that the weakness has stabilized.”

Next 1-3 weeks: “Yesterday (26 Oct, 7.3300), we indicated that while upward momentum has waned somewhat, there is still chance for USD to rise to the major resistance at 7.4000. We clearly did not expect the outsized selloff as USD nose-dived by 1.74% (NY close of 7.1880), its largest 1day drop on record. The break of our ‘strong support’ at 7.2600 indicates that the rally in USD that started two weeks ago (see annotations in the chart below) has ended. The current large pullback has room to extend to 7.1500, possibly 7.1300. On the upside, a break of the ‘strong resistance’ at 7.3000 would indicate that the rapid build-up in downward momentum has eased.”