USD/CNH: Probable drop to 6.4300 near term – UOB

UOB Group’s FX Strategists believe USD/CNH could slip back to the 6.4300 level in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘downward pressure is beginning to ease but it appears too soon to expect a recovery’ and we expected USD to ‘consolidate and trade between 6.4450 and 6.4650’. Our view for consolidation was not wrong but USD traded within a narrower range than expected (6.4478/6.4591). The underlying tone has weakened somewhat and USD could drift lower today. Barring a sudden surge in downward momentum, the major support at 6.4300 is not expected to come into the picture (there is another support at 6.4400). Resistance is at 6.4540 followed by 6.4650.”

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 subsequently edged below 6.4500 but was unable to make much headway on the downside. That said, it closed at 6.4479 yesterday (02 Sep). Downward momentum is showing tentative signs of improving and USD could drift lower t0 6.4300. On the upside, a break of 6.4710 (‘strong resistance’ level previously at 6.4750 previously) would indicate that the current mild downward pressure has eased.”