USD/CNH: Downside risks pick up pace – UOB

UOB Group’s FX Strategists suggested the outlook for USD/CNH could shift to negative on a close below 6.4500.

Key Quotes

24-hour view: “We highlighted yesterday that ‘while downward momentum has eased somewhat after the rebound, there is room for USD to retest the 6.4470 level before a more sustained recovery can be expected’. USD subsequently dropped to 6.4476 before rebounding slightly. Downward pressure is beginning to ease but it appears too soon to expect a recovery. For today, USD is likely to consolidate and trade between 6.4450 and 6.4650.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (01 Sep, spot at 6.4630). As highlighted, while the downside risk has increased further, we prefer to wait for a daily closing below 6.4500 before adopting a negative stance in USD. USD subsequently dropped to 6.4476 before rebounding to close at 6.4513. Downward momentum still appears to be a bit ‘hesitant’ and we continue to wait for a daily closing below 6.4500. Looking ahead, the next support is at 6.4300. On the upside, a break of 6.4750 (‘strong resistance’ level previously at 6.4820) would indicate that the downside risk has dissipated.”