USD/CNH: Set to test the strong resistance at 7.2705 – UOB Group

Rebound has gained some momentum; chance for US Dollar (USD) to test the strong resistance at 7.2705 vs Chinese Yuan (CNH). In the longer run, failure to hold below 7.2300 has diminished the likelihood of further USD decline, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Rebound has gained some momentum

24-HOUR VIEW: "We expected USD to 'trade sideways between 7.2350 and 7.2650” yesterday. However, USD briefly fell to 7.2264, rebounding to close unchanged at 7.2543. The rebound gained some momentum, and today, there is a chance for USD to test the strong resistance at 7.2705. On the downside, support levels are at 7.2430 and 7.2350."

1-3 WEEKS VIEW: "We have expected USD to decline since early last week. After USD fell and almost reached our technical target of 7.2300 last Thursday (low has been 7.2314), we highlighted on Friday (21 Feb, spot at 7.2400) that “to continue to decline, USD must break and remain below 7.2300.' Yesterday, USD fell below 7.2300 but rebounded strongly from 7.2264. The failure to hold below 7.2300 has diminished the likelihood of further decline. On the upside, a breach of 7.2705 (no change in ‘strong resistance’ level) would indicate that the weakness in USD has stabilised."