USD/CNH faces further downside pressure – UOB

In opinion of FX Strategists at UOB Group, USD/CNH risks a deeper pullback in the next weeks.

Key Quotes

24-hour view: “While we expected USD to weaken yesterday, we held the view that ‘the next major support at 6.6030 is unlikely to come into the picture’. However, USD edged below 6.6030 as it dropped to a low of 6.6020. Downward momentum is beginning to wane and this coupled with oversold conditions suggest USD is unlikely to weaken much further. From here, a dip below 6.6020 is ruled out but any weakness is viewed as a lower trading range of 6.5950/6.6350. In other words, a sustained decline below 6.5950 is unlikely.”

Next 1-3 weeks: “We highlighted yesterday (05 Nov, spot at 6.6450) that ‘further USD weakness is likely even though the major support at 6.6030 may not be easy to crack’. However, USD managed to breach 6.6030, albeit not by much (low of 6.6020). While USD is still on the defensive, the weakness appears to be running ahead of itself and the next support at 6.5800 may not come into the picture so soon. On the upside, a break of 6.6900 would indicate that the current downward pressure has eased.”