USD/CNH: Rising odds for further pullbacks – UOB

FX Strategists at UOB Group do not rule out USD/CNH slipping back to the 7.0370 level in the next weeks.

Key Quotes

24-hour view: “USD traded between 7.0836 and 7.0983 last Friday, narrower than our expected range of 7.0850/7.1050 before ending the day little changed at 7.0891 (-0.07%). The underlying tone has weakened somewhat and the risk from here is for USD to drift lower to 7.0730. For today, the next support at 7.0650 is unlikely to come into the picture. On the upside, 7.0980 is likely strong enough to cap any intraday recovery (minor resistance is at 7.0910).”

Next 1-3 weeks: “The rebound in USD from a low of 7.0370 (Apr 10) touched 7.1087 on 21 Apr and since then, it has not been able to make much headway on the upside. The price action is not out of line from our expectation from 16 Apr (spot at 7.0770) wherein USD “has likely moved into a consolidation phase” and “is likely to trade between 7.0450 and 7.1250 for a period”. That said, the underlying tone has weakened, and the downside risk is beginning to increase. From here, unless USD can move above 7.1030 within these few days, a break of 7.0650 would improve the prospect of USD moving below 7.0370.”