FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang note USD/CNH could now challenge the key 7.0000 hurdle in the short term.
24-hour view: “The strong surge in USD that easily took out a couple of strong resistance level came as a surprise (we were expecting sideway-trading). The impulsive rally is likely to extend and the level to focus on is obviously at 7.0000. A break of this level is not ruled out but in view of the deeply overbought conditions, USD may not be able to maintain a foothold above this level. Support is at 6.9620 followed by 6.9500.”
Next 1-3 weeks: “We have expected a stronger USD for more three weeks now. In our latest narrative from yesterday, we indicated that while further USD strength is likely, USD has to close above 6.9600 before a move towards 7.0000 can be expected. We did not expect the subsequent sharp rally as USD surged to 6.9816 before closing at 6.9712. From here, all eyes are on 7.0000. A break of this level would shift the focus to 7.0500. The USD strength is deemed intact as long as USD does not move below the ‘strong support’ at 6.9300 (level was at 6.9070 yesterday).”