USD/CNH: Downside momentum keeps shaping up – UOB

Further losses appear on the cards on a break below 6.4500 for USD/CNH, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our view for USD to ‘trade between 6.4600 and 6.4730’ was incorrect as it plummeted briefly to 6.4472 before rebounding sharply. While downward momentum has eased somewhat after the rebound, there is room for USD to retest the 6.4470 level before a more sustained recovery can be expected. On the upside, a break of 6.4710 (minor resistance is at 6.4640) would indicate that the downside risk has dissipated.”

Next 1-3 weeks: “On Monday (30 Aug, spot at 6.4630), we highlighted that the downside risk has increased but USD has to close below 6.4500 before a sustained decline can be expected. USD cracked 6.4500 yesterday (31 Aug) as it plummeted briefly to 6.4472 before rebounding to close at 6.4540 (-0.18%). While the downside risk has increased further, we prefer to wait for a daily closing below 6.4500 before adopting a negative stance in USD. The chance for USD to close below 6.4500 appears to be quite high as long as it does not move above 6.4820 within these few days. Looking ahead, the next support below 6.4500 is at 6.4300.”