USD/CNH keeps the consolidative theme unchanged so far – UOB

FX Strategists at UOB Group believe USD/CNH should stick to the rangebound stance for the time being.

Key Quotes

24-hour view: “Yesterday, we held the view that USD ‘could test the 7.0600 support first before a more sustained recovery can be expected’. USD subsequently dropped to 7.0608 before staging a strong rebound to an overnight high of 7.0900. Despite the rapid rebound, upward momentum has not improved by much. However, there is scope for USD to edge higher towards 7.0960. For today, a sustained rise above this level is unlikely. Support is at 7.0720 followed by 7.0660.”

Next 1-3 weeks: “Last Monday (08 Jun, spot at 7.0570), we indicated that USD ‘could weaken to 7.0400’. After USD dropped to 7.0400, we highlighted on Thursday (11 Jun) that ‘the negative phase in USD is still intact and noted that the next support below 7.0400 is at 7.0200 followed 7.0000’. We added, ‘oversold short-term conditions could lead to a few days of consolidation first’. The subsequent consolidation has resulted in a rapid loss in momentum and while our 7.0950 ‘strong resistance’ is still intact, the prospect for USD to move below 7.0400 from here has dissipated. In other words, USD has likely moved into a consolidation phase and is expected to trade between 7.0500 and 7.1250 for a period.”