USD/CNH: Downside pressure mitigated above 6.3750 – UOB

UOB Group’s FX Strategists noted the selling pressure in USD/CNH should alleviate once the pair clears 6.3750.

Key Quotes

24-hour view: “We expected USD to weaken yesterday but we were of the view that ‘any weakness is expected to encounter solid support at 6.3530’. The anticipated weakness exceeded our expectations as USD dropped to 6.3452 before rebounding strongly. Downward pressure has eased with the rebound and USD has likely moved into a consolidation phase. In other words, USD is likely to trade sideways for today, expected to be between 6.3480 and 6.3650.”

Next 1-3 weeks: “Yesterday (31 Mar, spot at 6.3590), we highlighted that USD is likely to trade with a downward bias towards 6.3530, possibly 6.3450. Our view for a weaker USD turned out to be correct but we did not expect the subsequent sharp and swift drop to 6.3452. A break of 6.3450 would not be surprising but oversold shorter-term conditions could lead to 1-2 days of consolidation first. Overall, only a breach of 6.3730 (‘strong resistance’ level was at 6.3770 yesterday) would indicate that the current downward pressure has eased. Looking ahead, the next support below 6.36450 is at 6.3350.”