USD/CNH: Downside should be contained around 6.5940 – UOB

According to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, a deeper decline in USD/CNH should meet decent support around 6.5940.

Key Quotes

24-hour view: “Yesterday, we held the view that USD ‘is likely to edge higher but is unlikely to break the resistance at 6.7350’. USD subsequently rose to 6.7150 before staging a surprisingly sharp sell-off to a low of 6.6543. USD extended its decline during early Asian and while further USD weakness is not ruled out, the major support at 6.5940 is likely out of reach for now (there is another support at 6.6100). Resistance is at 6.6500 followed by 6.6700.”

Next 1-3 weeks: “On Monday (30 May, spot at 6.7200), we highlighted that the outlook for USD is mixed and we expected USD to trade within a broad range of 6.6500/6.8000. USD traded well within the expected range for a few days but dropped below 6.6500 during early Asian hours today. The break of the solid support coupled with the rapid improvement in downward momentum has shifted the risk to the downside. However, USD already declined a fair bit and any further weakness could be limited to a test of the next solid support at 6.5940. Overall, USD is expected to trade on its back-foot unless it can move above 6.6850 (‘strong resistance’ level).”