USD/CNH: Still scope for a drop to 6.3180 – UOB

UOB Group’s FX Strategists noted USD/CNH still risks a decline to the 6.3180 level in the next weeks.

Key Quotes

24-hour view: “While we expected USD to weaken yesterday, we were of the view that ‘any weakness is expected to encounter solid support at 6.3300’. The subsequent weakness exceeded our expectations as USD dropped to 6.3248 before rebounding. The current movement is viewed as part of consolidation phase and USD is likely to trade between 6.3240 and 6.3430.”

Next 1-3 weeks: “Yesterday (24 Jan, spot at 6.3400), we highlighted that downward momentum is beginning to perk up and the chance for USD to break the major support at 6.3300 has increased. Our view was not wrong as USD subsequently dropped to 6.3248. Downward momentum has improved, albeit not by much. From here, USD could weaken further to 6.3180 (next support is at 6.3000). On the upside, a breach of 6.3500 (‘strong resistance’ was at 6.3650 yesterday) would indicate that the weak phase is USD that started more than a week ago (see annotations in the chart below) has come to an end.”