USD/CNH: Risk now shifted to the downside – UOB

USD/CNH now risks further pullbacks, although a strong support emerges at 6.4400, comment FX Strategists at UOB Group.

Key Quotes

24-hour view: “The sharp drop in USD to 6.4635 yesterday came as a surprise (we were expecting sideway-trading). Downward momentum is strong and USD could break the April’s low at 6.4615. In view of the already oversold conditions, the next support at 6.4500 is likely out of reach. Resistance is at 6.4700 followed by 6.4750.”

Next 1-3 weeks: “Two days ago (05 May, spot at 6.4830), we highlighted that while the recent negative phase in USD has ended, ‘it is too soon to expect a recovery’. We held the view that USD could trade between 6.4650 and 6.5020. We did not anticipate the rapid manner by which USD plummeted to 6.4635 yesterday. The risk has shifted to the downside again but in view of the nascent build-up in downward momentum, any weakness may find it difficult to break 6.4400. The downside risk is deemed intact as long as USD does not move above 6.4820 (‘strong resistance’ level).”