USD/CNH: Still scope for a drop to 7.2000 – UOB

USD/CNH still risks a potential retracement to the 7.2000 region in the near term, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: We expected USD to trade in a sideways range of 7.2470/7.2700 yesterday. USD then rose close to 7.2700 (high of 7.2684) and then declined to a low of 7.2427. Downward momentum has increased, albeit not much. Today, USD could break the major support at 7.2380, but it remains to be seen if it can maintain a foothold below this level. The next support at 7.2250 is unlikely to come into view. In order to keep the mild downward momentum going, USD must stay below 7.2650 (minor resistance is at 7.2550). 

Next 1-3 weeks: There is not much to add to our update from Wednesday (15 Nov, spot at 7.2600). As highlighted “downward momentum has increased, and USD is likely to weaken further to 7.2380.” If USD breaks clearly below 7.2380, the focus will shift to 7.2000. On the upside, if USD breaks above 7.2900 (‘strong resistance’ level previously at 7.3000), it would indicate that current downward momentum has faded