USD/CNH: USD is likely to continue to weaken – UOB Group

Sharp decline has resulted in increase in momentum; USD is likely to continue to weaken, potentially to 7.0100, UOB Group FX analysts Quek Ser Leang and Peter Chia note.

USD/CNH to continue falling towards 7.0100

24-HOUR VIEW: “USD fell sharply two days ago. Yesterday, we indicated that ‘while further USD weakness appears likely today, oversold conditions suggest any further decline could be relatively limited.’ We added, ‘the levels to watch are 7.0380 and 7.0270.’ However, USD did not decline much further, rebounding to 7.0650. The current price action is likely part of a consolidation phase. Today, we expect USD to trade in a 7.0450/7.0680 range.”

1-3 WEEKS VIEW: “We turned negative in USD last Friday (20 Sep, spot at 7.0700), indicating that it ‘is likely to trade with a downward bias towards 7.0500.’ After USD fell to a low of 7.0387, we indicated yesterday (23 Sep, spot at 7.0450) that ‘the sharp decline has resulted in further increase in downward momentum, and USD is likely to continue to weaken, potentially to 7.0100.’ While the subsequent sharp rebound has dented the momentum somewhat, our view remains unchanged for now. However, a breach of 7.0770 (no change in ‘strong resistance’ level) would mean that USD is not weakening further.”