USD/CNH could lose further momentum and revisit the 7.2600 region in the short-term horizon, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.
Key Quotes
After USD soared to a high of 7.3678 last Friday, we highlighted yesterday that “the advance appears to be overdone, and USD is unlikely to rise further.” We expected USD to trade between 7.3300 and 7.3650. We did not anticipate the sharp selloff that sent USD plunging to a low of 7.2921. Despite the rebound from the low, the weakness in USD has not stabilised. Today, USD could drop further to 7.2870 before stabilisation can be expected. Resistance is at 7.3210, followed by 7.3330.
Yesterday (11 Sep, spot at 7.3560), we were of the view USD “could rise further to 7.3800, with lesser odds of it testing 7.4000.” We indicated that “if USD breaks below 7.3100, it would mean that USD is not rising further.” USD then plunged to a low of 7.2921 before closing lower by a whopping 0.86% (NY close of 7.3018), its biggest 1-day drop in about 6 months. While it is premature to expect a major reversal, the sharp pullback could extend to 7.2600. Overall, only a breach of 7.3520 would indicate that USD is not ready to pullback further.
