USD/CNH: Further losses could be running out of steam – UOB

24-hour view: While we highlighted yesterday that the combination of slowing downward momentum and oversold conditions “suggests a low risk of USD weakening”, we held the view that “USD is likely to consolidate between 7.1350 and 7.1800.” Instead of consolidating, USD rose to a high of 7.1890 before closing on a firm note at 7.1793 (+0.30%). Upward momentum has increased a tad, and there is a chance of USD breaking above the strong resistance at 7.1930. The major resistance at 7.2180 is unlikely to come into view. Support is at 7.1720, followed by 7.1560.

Next 1-3 weeks: Last Monday (10 Jul), when USD was trading at 7.2230, we indicated that “short-term momentum is building rapidly and the risk of USD pulling back below 7.1800 has increased.” Our view of a lower USD turned out to be correct. After USD dropped to 7.1240 and rebounded, we indicated yesterday (17 Jul, spot at 7.1500) that while USD “is still weak, the next major support at 7.1000 may not come into view so soon.” In NY trade, USD rose to a high of 7.1890. Upward momentum is beginning to fade. However, only a break above 7.1930 (no change in ‘strong resistance’ level) would suggest that 7.1000 is not coming into view this time around.