USD/CNH: Support is at 6.9700 – UOB Group

Further sharp declines appear likely; support is at 6.9700. Not unreasonable to expect further US Dollar (USD) weakness, particularly when there are no significant support levels close by, UOB Group FX strategists Quek Ser Leang and Peter Chia note.

USD/CNH to continue to trade lower

24-HOUR VIEW: “The sharp selloff that sent USD plunging yesterday took us by surprise (we were expecting consolidation). Not surprisingly, further USD weakness seems likely today. As the next support is some distance away at 6.9700, we could continue to see sharp declines today. On the upside, any short-term rebound is likely to remain below 7.0380 with minor resistance at 7.0200.”

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 sharply, in our most recent narrative from two days ago (23 Sep, spot at 7.0450), we indicated that “the sharp decline has resulted in further increase in downward momentum, and USD is likely to continue to weaken, potentially to 7.0100.” Yesterday, USD fell to 7.0117. Today, USD fell below 7.0000. Given the impulsive price movements, it is not unreasonable to expect further USD weakness, particularly when there are no significant support levels close by. Meanwhile, the short-term levels to monitor are 6.9700 and 6.9400. Overall, we will continue to expect a lower USD provided that 7.0600 (‘strong resistance’ level previously at 7.0770) is not breached.”