USD/CNH: Decline in USD seems excessive – UOB Group

US Dollar (USD) could trade in a range of 7.2550/7.2950. In the longer run, decline in USD seems excessive, but there is potential for a test of 7.2420, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Potential for USD/CNH to test 7.2420

24-HOUR VIEW: “After USD plunged two days ago, we indicated yesterday, ‘while further weakness is not ruled out, given the deeply oversold conditions, the major support at 7.2420 is likely out of reach (there is another support level at 7.2500).’ USD fell less than expected to 7.2530, rebounding to close largely unchanged at 7.2700 (+0.07%). The price action provides no fresh clues, and today, USD could trade in a range, likely in a range of 7.2550/7.2950.”

1-3 WEEKS VIEW: “We turned negative in USD yesterday (21 Jan, spot at 7.2720). We pointed out that ‘while the decline seems excessive, there is potential for USD to test the support at 7.2420.’ We will continue to hold the same view, provided that 7.3230 (‘strong resistance’ level was at 7.3380 yesterday) is not breached.”