USD/CNH risks a deeper drop in the short term- UOB

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang noted that the downside pressure in USD/CNH has increased.

Key Quotes

24-hour view: Yesterday, we held the view that USD could test 7.1240 before stabilising. USD did not test 7.1240, but traded sideways in a range of 7.1370/7.1636. The underlying tone still appears to be soft, and we continue to hold the view that USD could test 7.1240. Resistance is at 7.1550, followed by 7.1600. 

Next 1-3 weeks: After USD plummeted to a low of 7.1259, we highlighted yesterday (26 Jul, spot at 7.1465) that “downward momentum has increased, and there is room for USD to weaken further.” We added, “it is worth noting that there are a couple of strong support levels at 7.1240 and 7.1000.” We continue to hold the same view. The downside risk is intact as long as USD stays below 7.2000 (no change in ‘strong resistance’ level).