USD/CNH: Upside faces a solid resistance at 6.9650 – UOB

Extra gains in USD/CNH appear on the cards and are expected to meet a tough barrier around 6.9650, note UOB Group Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “The strong jump in USD came as a surprise (we were expecting it to trade sideways). The rapid advance appears to be overdone but with no sign of easing just yet, USD could rise above the NY high near 6.9510. However, the major resistance at 6.9650 is likely out of reach today. Support is at 6.9300, followed by 6.9230.”

Next 1-3 weeks: “We have held the same view since last Thursday (20 Apr, spot at 6.8920) wherein ‘upward momentum is beginning to improve but USD has to break and stay above 6.9350 before a sustained rise is likely’. We indicated that, ‘The chance of USD breaking clearly above 6.9350 is not high for now but it will remain intact as long as the ‘strong support’ level at 6.8600 is not taken out’. However, we did not quite anticipate the strong rally yesterday that blew past 6.9350 (USD soared to a high of 6.9509 in NY trade). While upward momentum has improved further, the rally appears to be running ahead of itself and the major resistance at 6.9650 might not come into view so soon. Overall, USD is expected to stay underpinned in the coming days as long as it stays above 6.8950 (‘strong support’ level previously at 6.8600).”