The continuation of the selling pressure could drag USD/CNH to another test of the 6.7500 zone in the short term, note UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.
Key Quotes
24-hour view: “While we expected USD to weaken last Friday, we were of the view that ‘6.8560 is unlikely to come into view’. The anticipated USD weakness exceeded our expectations as USD cracked a couple of solid support levels and plunged to 6.8243. Solid downward momentum suggests USD could break 6.8000 but it might not be able to maintain a foothold below this level (next support is at 6.7700). On the upside, any rebound is unlikely to challenged 6.8550 (minor resistance is at 6.8350).”
Next 1-3 weeks: “Our latest narrative was from last Thursday (05 Jan, spot at 6.8910) where the risk for USD is still on the downside but any decline ‘is expected to face solid support at 6.8400’. While our view of USD weakening is not the wrong, the anticipated support at 6.8400 did not materialize as GBP plunged to a low of 6.8243 on Friday. Not surprisingly, downward momentum is very strong and we expect USD to weaken further, albeit likely at a slower pace. Support levels are at 6.7700 and 6.7500. Overall, only a break of 6.8800 (‘strong resistance’ level was at 6.9250 last Friday) would indicate that the downward pressure has eased.”