USD/CNH still risks a move to 7.0400 – UOB

In opinion of FX Strategists at UOB Group, USD/CNH could drop and test the 7.0400 region in the next weeks.

Key Quotes

24-hour view: “While our expectation for USD to strengthen yesterday was correct, our view that it ‘is unlikely to move above 7.0850’ was not. USD soared to a high of 7.0912 before easing off quickly. Momentum indicators are mostly ‘neutral’ now and for today, USD is expected to consolidate and trade between 7.0640 and 7.0950.”

Next 1-3 weeks: “Our latest narrative was from last Wednesday (03 Jun, spot at 7.1050) wherein ‘a daily closing below 7.0850 could signal the start of a deeper decline in USD’. USD plummeted last Friday (05 Jun) and closed on a weak note at 7.0685. While oversold shorter-term conditions could lead to a couple of days of consolidation first, barring a move above 7.1210 (‘strong resistance’ level), USD could weaken further to 7.0400 in the coming days.”