USD/CNH: Dwindling bets for a potential drop to 6.8400 – UOB

In opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, the likelihood of USD/CNH grinding lower to 6.8400 appears now diminished.

Key Quotes

24-hour view: “We highlighted yesterday that ‘after such a sharp drop, further sustained decline is unlikely’. However, we were of the view that ‘there is scope for the USD weakness to extend to 6.8550 before stabilization is likely’. Instead of weakening further, USD staged a surprisingly robust rebound to 6.9340 before closing at 6.9229 (+0.62%). The price actions are likely part of a broad consolidation range and USD is likely to trade between 6.8800 and 6.9300 today.”

Next 1-3 weeks: “Yesterday (02 Mar, spot at 6.8800), we noted that the month-long USD weakness has ended. We held the view that while there is room for USD to weaken, any decline is likely to face solid support at 6.8400. USD subsequently popped to a high of 6.9340, just below our ‘strong resistance’ level of 6.9350. We continue to hold the same view but after yesterday’s price actions, the chance of a decline to 6.8400 has diminished. Looking ahead, if USD were to break above 6.9350, it would indicate that it could trade in a broad consolidation range for a period of time.”