USD/CNH: Rising bets for a drop to 6.9500 – UOB

The downside momentum as well as a potential move to 6.95 in USD/CNH remain on the rise, in opinion of FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we highlighted that USD ‘could drift lower to 6.9760’ and added, ‘in view of the lackluster momentum, the next support at 6.9650 is unlikely to come into the picture’. Our view was not wrong as USD dropped to a low of 6.9694. Downward momentum has improved, albeit not by all that much and from here, USD could dip below 6.9650 but the major support at 6.9500 is not likely to come into the picture (there is another support at 6.9580). Resistance is at 6.9780 followed by 6.9850.”

Next 1-3 weeks: “We have held a negative view in USD since early this month (see annotations in chart below) and our latest narrative was from last Monday (13 Jul, spot at 7.0050) wherein USD ‘could weaken further to 6.9650 with lower odds for extension to 6.9500’. After trading in a lackluster manner for more than a week, USD lurched lower and closed at 6.9725 yesterday, its lowest daily closing in about 4 months. Downward momentum has improved and from here, 6.9650 is not as strong a support as previously and the odds for USD to move to 6.9500 have increased considerably. Looking forward, the next support is at 6.9300. Overall, USD is expected to remain under pressure unless it moves above 6.9920 (‘strong resistance’ level was previously at 7.0180).”