USD/CNH: Room for another leg lower towards 7.2200 before stabilization – UOB Group

As long as any recovery in US Dollar (USD) remains below 7.2500 vs Chinese Yuan (CNH), there is room for another leg lower towards 7.2200 before stabilization can be expected. In the longer run, while there has been no significant increase in momentum, USD could potentially drop to 7.2000, UOB Group's FX analysts Quek Ser Leang and Peter Chia note. 

USD can potentially drop to 7.2000

24-HOUR VIEW: "Two days ago, USD rose to a high of 7.2697 before closing at 7.2637. Yesterday, we highlighted that 'despite the advance, there has been no significant increase in momentum, and instead of continuing to rise, USD is more likely to trade in a 7.2400/7.2700 range.' Instead of trading in a range, USD fell, reaching a low of 7.2250 in late NY trade. The sharp drop appears to be overdone, and while USD could recover today, as long as 7.2500 is not breached, there is potential for further downside toward 7.2200 before stabilization can be expected. The major support at 7.2000 is unlikely to come into view today." 

1-3 WEEKS VIEW: "In our most recent narrative from last Thursday (06 Mar, spot at 7.2440), we indicated that 'the downward pressure remains intact, and should USD break below and hold below 7.2260, the next level to watch is 7.2000.' Yesterday (Tuesday), USD fell slightly below 7.2260 (low of 7.2250). While there has been no significant increase in downward momentum, USD could potentially drop to 7.2000. We will hold the same view, provided that the ‘strong resistance’ at 7.2650 (level previously at 7.2800) is not breached."