United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann note that USD/CNH is currently consolidating in a narrow range around 6.77. In their 1–3 week view, they maintain a downside bias toward 6.7600 as long as strong resistance at 6.7820 remains intact. Over 1–3 months, they see tentative upside potential if key technical resistance is broken.
Short-term consolidation, medium-term downside bias
“24-HOUR VIEW: After USD fell as we expected on Wednesday, we highlighted the following yesterday: “Our view was not wrong, as USD subsequently rose to 6.7781 and then fell to a low of 6.7653. Downward momentum continues to increase, and today, there is a chance for USD to test 6.7600. To keep the momentum going, USD must hold below 6.7780 (minor resistance is at 6.7720).” Our expectation did not materialise, as USD traded in a quiet manner between 6.7649 and 6.7753, closing little changed at 6.7734 (+0.07%). The current price movements are likely part of a consolidation phase, which is expected to be between 6.7670 and 6.7780.”
“1-3 WEEKS VIEW: Two days ago (15 Jul, spot at 6.7720), we highlighted that “downward momentum is increasing, and USD is likely to trade with a downside bias toward 6.7600.” We will continue to hold the same view as long as 6.7820 (no change in ‘strong resistance’ level) is not breached.”
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