USD/CNH: Chance of dropping below July’s low of 7.1435 – UOB Group

US Dollar (USD) could drop below July’s low of 7.1435, but it might not be able to maintain a foothold below this level. In the longer run, rapidly increasing downward momentum indicates USD could drop below 7.1435; it is unclear now if 7.1290 is within reach, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Rapidly increasing downward momentum

24-HOUR VIEW: "While we indicated yesterday that 'there is scope for USD to drop further,' we were of the view that 'any decline is likely part of a lower range of 7.1630/7.1830.' However, USD broke below 7.1630 and dropped sharply to a low of 7.1492. USD rebounded from the low to close at 7.1578, down by 0.20%. While conditions are oversold, USD could drop below July’s low of 7.1435 today. However, given the oversold conditions, USD might not be able to maintain a foothold below this level. To keep the momentum, USD must hold below 7.1710, with minor resistance at 7.1630."

1-3 WEEKS VIEW: "We turned slightly negative on USD yesterday (25 Aug, spot at 7.1740). We indicated that it 'may edge lower, but any decline is unlikely to break clearly below 7.1600.' However, USD easily broke below 7.1600 and dropped to a low of 7.1492. The rapidly increasing downward momentum indicates USD could drop below July’s low of 7.1435. Currently, it is unclear if the next support at 7.1290 is within reach. Overall, we will maintain our negative view as long as 7.1800 (‘strong resistance’ level was at 7.1860 yesterday) is not breached."