USD/CNH sticks to the consolidative theme – UOB

UOB Group’s FX Strategists reiterated tat USD/CNH is expected to keep the rangebound mood for the time being.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘a break of the strong resistance at 7.0950 would not be surprising but USD is unlikely to move above 7.1100’. USD subsequently rose to a high of 7.0972 before dropping back down quickly. The rapid decline appears to be running ahead of itself but there is room for USD to test 7.0600 first before a more sustained recovery can be expected. Resistance is at 7.0830 followed by 7.0900.”

Next 1-3 weeks: “Last Monday (08 Jun, spot at 7.0570), we indicated that USD ‘could weaken to 7.0400’. After USD dropped to 7.0400, we highlighted on Thursday (11 Jun) that ‘the negative phase in USD is still intact and noted that the next support below 7.0400 is at 7.0200 followed 7.0000’. We added, ‘oversold short-term conditions could lead to a few days of consolidation first’. The subsequent consolidation has resulted in a rapid loss in momentum and while our 7.0950 ‘strong resistance’ is still intact, the prospect for USD to move below 7.0400 from here has dissipated. In other words, USD has likely moved into a consolidation phase and is expected to trade between 7.0500 and 7.1250 for a period.”