USD/CNH risks a further retracement below 6.4240 – UOB

UOB Group’s FX Strategists noted USD/CNH faces sustainable losses on a breach of 6.4240 in the next weeks.

Key Quotes

24-hour view: “USD traded between 6.4415 and 6.4584 yesterday, narrower than our expected range of 6.4300/6.4600. The underlying tone has firmed somewhat and USD could edge higher to 6.4630. The next resistance at 6.4700 is unlikely to come into the picture. Support is at 6.4460 followed by 6.4400.”

Next 1-3 weeks: “After the sharp drop in USD last Friday, we indicated yesterday (04 Oct, spot at 6.4550) that ‘while downward momentum has improved somewhat, it appears too soon to expect a sustained decline in USD’. We added, ‘looking ahead, USD has to close below 6.4240 before a sustained decline can be expected’. USD subsequently rebounded but as long as 6.4800 is intact, the risk of USD closing below 6.4240 is intact. A break of 6.4800 would indicate that USD could trade sideways within a broad range for a period of time.”