USD/CNH: Downward momentum is beginning to slow – UOB Group

The US Dollar (USD) is likely to trade in a 7.0010/7.0350 range. In the longer run, downward momentum is beginning to slow; if USD breaches 7.0350, it would suggest that it could trade in a range for a period, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Likely to trade in a 7.0010/7.0350 range

24-HOUR VIEW: “After USD rebounded on Monday, we indicated yesterday (Tuesday) that USD could continue to rebound, but it does not appear to have enough momentum to threaten the strong resistance at 7.0350.’ In line with our expectations, USD rebounded, even though it almost broke above 7.0350 (high has been 7.0350). Despite the advance, there has been no significant increase in momentum, and instead of continuing to rise, USD is more likely to trade in a 7.0010/7.0350 range today.”

1-3 WEEKS VIEW: “After holding a negative USD stance for more than a week (as annotated in the chart below), we highlighted yesterday (01 Oct, spot at 7.0100) that “downward momentum is beginning to slow, and if USD breaches 7.0350 (‘strong resistance’ level), it would suggest that it could trade in a range for a period.” USD subsequently rose but did not break clearly above 7.0350 (high has been 7.0350). As our ‘strong resistance’ level has not been clearly breached, we will hold the same view for now, even though the likelihood of further USD weakness has diminished.”