Prospects for a test of the 6.5500 area in USD/CNH seems to have lost traction, noted FX Strategists at UOB Group.
24-hour view: “We expected USD to ‘trade between 6.5000 and 6.5330’ yesterday. We did not anticipate the sharp drop to 6.4843. The rapid decline appears to be overdone and USD is unlikely to weaken much further. For today, USD is more likely to trade between 6.4820 and 6.5100.”
Next 1-3 weeks: “After the strong surge to 6.5289, we highlighted yesterday (28 Jul, spot at 6.5200) that USD ‘is likely to strengthen further to 6.5500, possibly 6.5880’. We added, ‘the positive outlook for USD is deemed intact as long as USD does not move below 6.4820’. We did not anticipate the rapid manner by which USD gave up most of its gains as it plummeted to an overnight low of 6.4843. Upward momentum has been dented and the prospect for USD to move to 6.5500 has diminished. In order to rejuvenate the flagging momentum, USD has to move and stay above 6.5100 within these few days or a break of 6.4820 (no change in ‘strong support’ level) would indicate that USD is not ready to head higher just yet.”