USD/CNH now favours some side-lined trade – UOB

In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, USD/CNH could now face some consolidation, likely within 6.8100-6.9200.

Key Quotes

24-hour view: “We expected USD to trade in a range of 6.8150/6.8500 last Friday. However, it soared to a high of 6.8843 before closing on a strong note at 6.8717 (+0.62%). While the rapid rise is overbought, the risk for USD is still on the upside. That said, any advance is unlikely to break 6.9000. Support is at 6.8570, followed by 6.8400.”

Next 1-3 weeks: “We have expected a weaker USD for more than a week. In our most recent narrative from last Friday (24 Mar, spot at 6.8300), we indicated that while USD could weaken further, any decline is expected to face strong support at 6.8000. We added, ‘The downside risk is intact as long as it stays below 6.8710’. We did not anticipate the strong bounce in London trade that sent USD soaring to a high of 6.8843. The breach of our ‘strong resistance’ level at 6.8710 indicates that the weakness in USD has stabilized. The current movement is likely the early parts of a consolidation phase and USD is likely to trade between 6.8100 and 6.9200 for now.”