USD/CNH: A test of 7.0000 could be shaping up – UOB

FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang suggested that USD/CNH could challenge the 7.0000 region once 6.9600 is cleared.

Key Quotes

24-hour view: “While we expected USD to strengthen yesterday, we were of the view that ‘a break of 6.9400 is unlikely for now’. The anticipated USD strength exceeded our expectations as USD jumped to 6.9554 before pulling back. The pullback amidst overbought conditions suggest USD is unlikely to advance further. For today, USD is more likely to trade sideways between 6.9250 and 6.9500.”

Next 1-3 weeks: “We have expected a stronger USD for three weeks now. As USD struggle to extend its gains above 6.9325, we highlighted yesterday that while upward momentum has waned somewhat, only a break of 6.8700 would indicate that USD is not strengthening further. USD subsequently jumped to a high of 6.9554 before pulling back. Upward momentum has improved, albeit not by much. While further USD strength is likely, USD has to close above 6.9600 before a move towards 7.0000 can be expected. The chance for USD to close above 6.9600 would remain intact as long as USD does not move below 6.9070 (‘strong support’ level was at 6.8700 yesterday).”