USD/CNH: Upside risks look alleviated – UOB

According to FX Strategists at UOB Group, USD/CNH now seems to have moved into a consolidative phase, likely between 6.4600 and 6.5000.

Key Quotes

24-hour view: “Our view for USD last Friday was that ‘there is room for USD to move above 6.5000 but the next resistance at 6.5060 is likely out of reach’. Our view was not wrong as USD subsequently rose to 6.5000 before pulling back. Upward pressure has waned and the current movement is viewed as part of a consolidation. For today, USD is likely to trade between 6.4670 and 6.4900.”

Next 1-3 weeks: “Last Friday (09 Jul, spot at 6.4915), we highlighted that ‘upward momentum has improved further and a clear break of 6.5060 could potentially lead to a rapid rise to 6.5200’. USD subsequently rose to 6.5000 before pulling back. The failure to break clearly above 6.5000 coupled with waning shorter-term upward momentum suggests that USD is unlikely to strengthen further. In other words, the upside risk in USD that started in the middle of last week has ended sooner than expected. The current movement is viewed as part of a consolidation phase and USD could trade within a 6.4600/6.5000 range for a period of time.”