USD/CNH: Still scope for a move to 7.4000 – UOB

USD/CNH could still attempt to reach the 7.4000 region in the next few weeks, comment UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.

Key Quotes

24-hour view: “We highlighted yesterday that ‘solid upward momentum is likely to lead to further advance in USD’. We added, ‘A break of 7.3500 would not be surprising but in view of the deeply overbought conditions, 7.4000 is unlikely to come into view”. Our expectation was not wrong as USD soared to 7.3746. However, we did not expect the sharp drop from the high (low of 7.3034 in NY). Conditions remain overbought and this combined with waning momentum suggests USD is unlikely to advance further. For today, USD is more likely to consolidate and trade between 7.2950 and 7.3550.”

Next 1-3 weeks: “Yesterday (25 Oct, 7.3200), we indicated that the overbought USD rally will most likely continue. We noted that the next resistance is at 7.3500, followed by 7.4000. USD subsequently soared to a high of 7.3746 before pulling back. Upward momentum has waned somewhat with the pullback but as long as 7.2600 (no change in ‘strong support’ level from yesterday) is not breached, there is still chance for USD to rise to the major resistance at 7.4000.”