USD/CNH could retreat further and test 6.9400 – UOB

FX Strategists at UOB Group now see the probability that USD/CNH could slip back to the 6.9400 region.

Key Quotes

24-hour view: “We highlighted last Friday (28 Feb, spot at 7.0100) that USD ‘could dip below the overnight low but any weakness is viewed as part of a 6.9950/7.0250 range’. We underestimated the downside momentum as USD subsequently dropped to a low of 6.9775 before extending its decline upon this morning. From here, barring a move above 7.0000, USD is expected to move below the month-to-date low of 6.9575 (next support is at 6.9500).”

Next 1-3 weeks: “We highlighted last Friday (28 Feb, spot at 7.0200) that ‘the risk of a deeper pullback would increase from here unless USD can move and stay above 7.0250 within these few days’. However, the sudden slump of -0.45% (NY close of 6.9780) came as a surprise. From here, the pull-back in USD could extend to 6.9400. The ‘strong resistance’ level has moved lower to 7.0150 from 7.0250.”