Risk for US Dollar (USD) remains on the downside against Chinese Yuan (CNH); the significant support level at 7.1295 is probably out of reach for now. In the longer run, USD view is negative; it could drop to 7.1295, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
USD view is negative
24-HOUR VIEW: “We detected ‘a soft underlying tone’ yesterday. We indicated that ‘this is likely to lead to a lower range of 7.1635/7.1800 rather than a sustained decline.’ The subsequent price movements did not turn out as we expected. USD plunged and not only broke below 7.1635 but also the major support level at 7.1550. Given the strong downward momentum, the risk for USD remains on the downside. However, the significant support level at 7.1295 is probably out of reach for now (there is another support level at 7.1400). To sustain the strong downward momentum, USD must hold below 7.1630 (minor resistance is at 7.1560).”
1-3 WEEKS VIEW: “We have held the same view since last Monday (14 Jul, spot at 7.1730), wherein USD ‘is expected to trade in a range between 7.1550 and 7.1920.’ After trading in a relatively quiet manner for several days, USD plummeted and closed at 7.1514 yesterday, down by 0.25%. There has been a sharp increase in downward momentum, and we are revising our USD view to negative, anticipating a drop to 7.1295. We will maintain our view provided that USD remains below the ‘strong resistance’ level, currently at 7.1730.”